Buy Penny Stocks?
This question is not an easy one to answer. The answer depends on many variables. We'll start with who should not buy penny stocks. You should not buy penny stocks to invest in the college education of your children. It's a bad idea if the sole investment in your retirement portfolio is penny stocks. Having one or 2 penny stocks in a large retirement portfolio is great. But who wants to retire with a penny stock, if your luck that early buy will be trading on the nasdaq. Normally though, penny stocks are bought to be sold quickly for profit.
Largely people do not buy penny stocks for the long term profit of the company. Rarely does one of these low priced companies become a profitable one that trades on the major exchanges. The majority of these companies fail and even more fail their investors. Those who trade penny stock often realize that there are many companies that are not telling the truth in their filings or their press releases. Weeding through the scam companies and constant dilution is the job of a penny trader.
This is not to say all penny stocks are bad, there are many companies really trying to blossom into great investments. A majority, although they're bad investments, are great to trade during the ups and downs of the stock cycle. Most penny stock traders learn how to read charts to gain the most profit out of these cycles. You must be able to buy low and sell high in the otcbb market.
Remember, when you buy penny stocks, you're making a trade. Know what you expect to happened with the stock price or based on news within the company. If you get the profit you were hoping for, don't forget to sell. You must plan your trade. Also, if the stock fails to live up to your expectations, sell immediately. You don't want to hope it will bounce back penny stocks can keep going lower and lower into sub penny territory. Its very easy to throw a few thousand dollars on a running penny stock only to see it turn to the downside quickly, every second you wait is hundreds of dollars. Of course then you begin to think, where's the bounce? If you wait to long, that account will be empty.
Traders buy penny stocks for the profit. Whether it's a long term profit or a short term one. Usually its short term because penny stocks run so fast and straight up. If you hold on your just being greedy. Sometimes that greediness works out for the best. Don't buy penny stocks if you don't know what to expect or how to get out. You must trade with a plan. There are other articles here discussing what is a good entry price and when stocks are at their bottoms. Please read these articles and others before you buy penny stocks for the first time. Did I mention plan your trade.