What are penny stocks? Definition, risks and how to invest - Business Insider

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Penny stocks are cheap and often see massive gains, but they're also very risky. Here's what you should know before investing.

Penny stocks attract individuals who are comfortable with high-risk trading — usually very experienced investors who are able to distinguish small, valuable startups with great potential from low-value companies.

, author of "Penny Stocks for Dummies," adding, "that's a lot more exciting than you will ever see from any big-name stocks like IBM or McDonald's."be a good thing. As noted above, Amazon was an obscure company at one point. that penny stock investors "should be prepared for the possibility that they may lose their whole investment."Liquidity refers to how easily securities can be sold. Stocks can be characterized as less liquid when it's not easy to sell them without taking a loss. Since relatively few people trade in penny stocks, it can be hard to unload them, even when — especially when — they start to drop.

The SEC has recently issued new rules to increase information and improve investor protections. Brokers are now prohibited from quoting a price for a penny stock unless the issuing company has publicly released its current financials.

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Markharrisfx Your first line is all you need to know.

What you should know is not to invest in them unless you have 24 hours a day to study about them. YOU ARE NOT SMARTER THAN THE MARKET!

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