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Why some people avoid penny stock investments

Penny Stocks are floated by the companies having small market capitalization. There are many companies having penny stock listing during the times of getting bankruptcy. It is indeed risky to invest in penny stocks because the companies involved in the trade might not have good background. In fact, some of them are scams initiated by clever traders and others might be the companies leading towards bankruptcy. You can choose penny stock investments of any new company originating with best business models and a prospective thinking. You can lose all your money by investing in a wrong company. The norms for penny stocks are different in all the nations. In the United States, Penny stocks are the stocks having a value lesser than $5. There are different definitions for penny stocks and people have different conceptions for the same. In the United Kingdom, stocks with less than one pound value are penny shares. The main issue is that these stocks are nowhere included in prime stock market of the place. There is no obligation for the companies to reveal their systematic information and hence, there are chances for customers to lose their all money. Informed investments are always preferable and you can better invest on the shares listed on main stock exchanges. Pink sheets or OTCBB have many issues and the market is volatile in comparison to the main stock exchanges. Penny stocks are mainly considered as the stocks having lesser amount per share. You have to buy and sell the stocks on the right time to gain something from it. There are low liquidity levels of the shares, which makes the manipulative dealers to give their own prices for stocks. The easiest way is to do diversified purchasing of stocks and not investing altogether into one company’s share. Penny Stocks are capable to make you earn money, but it is essential to choose the right stocks and not get into the trap of fraudulent dealers.