Stocks Under $1 And The Risks And Rewards

First and foremost, what are stocks under $1?

All stocks under one dollar can also be referred to as penny stocks. Most of these stocks are traded on FINRA’s OTC Bulletin Board or pink sheets which basically functions as stock exchanges but not required by law to register with the securities and exchange commission. On these two stock exchanges, there are no minimum standards required for a company to remain afloat which makes it difficult for investors to know when a company is going under or thriving.

If you are considering investing in stocks under$1, is it a good decision? What are your odds?

Well, let me begin by stating that it isn’t a bad decision. Nonetheless, there are things you essentially need to understand before you can stake out your money. Above all, this investment comes with high risks, while on the other hand, it holds the potential for extraordinary financial gains.

But then again, if there are chances for extraordinary financial gains, what makes it risky to invest in penny stocks? Well, any investment, no matter how safe it is, comes with its own risks and rewards. Nevertheless, with the right advice from people like us, there are ways to make money with penny stocks. In this article, I will be providing a breakdown of the rewards and risks of this investment.

So, what are the low downs of investing in stocks under $1?

In this section, I am going to explain the most prominent risks associated with investing in stocks under $1 so that you can express caution if you finally make the decision to invest. Most of the risks are associated with scammers. Inexperienced investors could fall prey to these criminals and end up investing in worthless stocks.

Pump-and-Dump Schemes

This is one of the most prominent risks when it comes to investing in stocks under $1. Promoters and organizers arouse interest in an unknown or scarcely known stock. This entices inexperienced investors to buy the stocks which increase their price. After the stock has attained an inflated price, these criminals dump or sell their stock reaping huge profits. As a result of this, inexperienced investors end up losing their money.

Short-and-Distort

This is a reverse of the pump and dump scheme where scammers and criminals short sell with the goal of fleecing investors to make profits. Short selling occurs when a promoter borrows shares then instantly sells them at very high prices hoping that the target company fails so that he can buy the shares at very low prices. The shares are then returned to the lender and the promoter earns decent profits. Most of the times, short selling is achieved through spreading damaging information about a company. This results in investors losing their stock while short sellers make profits

Offshore Scams

Under the United States Securities and Exchange Commission, companies operating outside the US are not required to register their shares when selling to investors in offshore countries scammers of stocks under $1 like it that way. They purchase cheap and unregistered shares overseas then sell them to investors in the US at hyped prices. The incursion of these shares drops the company’s stock price. Scammers make money while investors remain with worthless stocks.

With all these risks, are there any rewards investing in stocks under$1?

Well. There are several benefits but I am going to discuss only a few.

Potential for high gains

It isn’t a surprise for stocks under $1 to increase by 50 or even 100 percent in a single day. These kinds of gains aren’t easy to find in typical stock markets regardless of the industry. Even if there was potential for high gains in normal stock markets, most investors don’t have the resources to buy many stocks. Gains from stocks under $1 happen in a matter of hours or a day making them more exciting when compared to normal stock markets where gains can be realized in months.

Suitable for small investors

Stock markets can be frustrating to small investors since they do not have large amounts of capital to invest. Though stocks under $1 are risky, they provide a chance for small investors to invest.

Patterns do exist.
Even if you are an amateur or an inexperienced investor, with time, you will begin to identify patterns. It is just a matter of learning, identifying and mastering these patterns. If you are good enough to identify these patterns, they will give you golden chances to make handsome profits. Through identifying patterns, you will in a position to consistently reap profits from your penny stock investment.

Bottom line

There is no doubt that stocks under $1 can be a big gamble. However, with the right guidance from people like us and exercising caution, you can make decent profits.

 

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