Penny stocks are hot at the moment, and investors are talking about them because of their low share price and potential to make for big, quick gains.
The downside, unfortunately, is that if you choose a bad stock, you stand the risk of making big, quick losses too.
This is why it is always so important for investors to do their research before investing in a stock, they don't refer to the world of penny stocks as the Wild West for nothing! Penny stocks are renowned in the world of investment for their volatility and the potential for fluctuating values - something as seemingly insignificant as a rumor on social media can cause a penny stock's value to swing.
That being said, if you're on the right side of that swing, you can make a lot of money out of a small investment, and in a short amount of time to boot.
So do your research! Per share, penny stocks are generally under a dollar.
This means that anyone can buy a good amount of them and stand the chance of earning a considerable amount of money.
This does, however, also give the stocks a tendency to be unstable.
Unfortunately, this impressionable nature invites opportunists who manipulate the price of stocks so that they profit at the expense of countless other investors.
This is referred to as the "Pump and Dump".
These fraudsters will start out by buying a good amount of very low-value stock, the type of stock that no one wants and is, as a result, literally worth pennies.
They then move onto the first part of the scam: the "Pump".
This involves reaching out to as many people as possible inviting them into investing in "a stock that's about to go big," convincing their victims that it's a "sure-thing".
The more people the scam-artist recruits, the more the value starts to rise and the easier it becomes to convince the uninformed that the stock is on the rise, as it really is at that point - but not for long...
Once they recruited a large amount of investors, driving up the value of said stock, they then quickly sell their once worthless stock for a big profit and vanish.
This is referred to as the "Dump" because as soon as they sell their many shares, the value of all the victims' stock takes a huge dump as a result.
I don't mean to scare you off, people do make a lot of money on penny stocks, but those people do their research before they invest.
They are likely to know everything about the company, or portfolio of companies, that they're investing in.
So make a hobby out of it, invest in a sector that you're interested in! Then you just need to find a good source of information to keep up to date with stocks in your sector, like my personal favorite for instance.
They focus just on news and alerts pertaining to the exciting world of the budding $1.
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Check it out, maybe you're the next marijuana penny stock millionaire!