MICHEL PIREU: Penny stocks a good investment despite high risk and low return
Cheap shares are frowned on but money can be made if all the pitfalls are considered
The term "penny stock" generally refers to low-priced speculative securities of very small companies. To quote the US Securities and Exchange Commission: "Investors in penny stocks should be prepared for the possibility that they may lose their whole investment." Some thoughts on and around penny stocks: Should "small" investors be looking at penny stocks? No, in fact, they should avoid penny stocks at any cost. If they’re "cheap" in the sense of only costing a few cents to buy, it doesn’t mean they’re "cheap" in the sense of giving value for money — it’s usually the opposite. And if they are "cheap", in the sense of being good value, there’s a probably a good reason for it. Not only are penny stocks often bought for the wrong reasons, they’re often bought at the wrong time. They’re bought by punters who don’t have an "edge"— something that sets them apart. Instead they buy into penny stocks for the same reason they buy lottery tickets — in the hope of getting lucky. Now, a flight t...
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