Is it possible to make fortune on penny stocks?

There are many debates on making their fortune on penny stocks. It is too tempting to buy a stock at a few cents and sell it for a few dollars per stock. The truth is that there are very fewer people who know the right stocks to buy. Otherwise, penny stocks can only take your money away. Finding a worthy penny stock is not an easy task.
There is no legalized index for the micro-cap stocks and there are immediate turn-over values for the investment. You will have a chance to find out many other options which can actually make your investments go towards a better level. The speculators for penny stocks need to know that the poor performance of these stocks is due to the bad reputation of some of the stocks. There is no index related to OTCBB stocks and hence, the success of the stocks can’t be measured appropriately. There are many problems associated with penny stocks, like:
Low Liquidity Levels
Penny stocks are sold with a value of a few cents or lesser than $1. The general definition of these stocks is below $5 per stock but these are mostly lesser than one dollar in value. The check of legitimate penny stocks is by seeking the OTCQX Composite index and this value is prepared by the OTC markets by listing the companies listed on the marketplace. With this, the purpose of the all-encompassing index is defeated.
The standards of liquidity require the stocks index to post the trading standards at regular intervals. Penny stocks are so volatile that you can’t get guaranteed funds whenever you require them. During the times of urgency, there is no chance of selling the stocks as these are volatile and the price fluctuations are very often. On the other hand, the stocks on the major stock exchanges are highly liquid with a narrow bidding rate. You can trust to get your money during an emergency and the buying and selling prices are quite similar during the normal phases. Penny stocks have the substantial bid range and it the investors don’t get enough gain by selling the stocks.
Frauds involved with penny stocks
The search for the best penny stocks is just similar to finding out the unique gem among the heap of stones. This means that the probability of finding the right stock is very low. You might get happy that you own a thousand stocks of a company with a low price per share but it is obviously not the case of quantity. The quality of stocks determines their value and worth.
There are many fraudster brokers and company’s management which promote the fake stocks and pump the stock prices by purchasing large quantities of stocks. They properly do the marketing of these stocks on various platforms and promote them to gain a higher position. As the stock price becomes high, the frauds sell all the stocks with huge profits. It accumulates all the money from the innocent investors and they lose their investments to a null position. This scheme is termed as ‘Pump & Dump’.
Most of the penny stocks are manipulative and will eventually be delisted. There is no control over these stocks and you have a probability of losing your whole investment by trading penny stocks.
Penny stocks are cheap for a reason
Penny stocks are priced low for a reason. They are cheap to attract a number of visitors towards them. Quality companies start their mass collection of stocks at a higher price and those stocks are listed on the major stock exchanges for a security. If you’re taking only the case of Microsoft Corp which started with 10 cents, then it would only be a deceiving example. The IPO stock was $21 a share and it reached to highest levels with strong fundamentals and promising future.
If you’re interested to buy a penny stock, just look at the reason which prompted you to buy the stock. There is something associated with the buyers to make a choice for these stocks and most of the reasons turn out to be frauds later on. The stocks of many companies declined to zero level and investors suffered huge losses.
Lack of Information
There is a common thing in many penny stocks. You are not sure about the companies and the mysterious ways through which they have generated profits. The investors have no idea about the ups and downs of stock prices. There are assumptions or suspicions associated with the company’s unstable positions and it collapses later on. There is not much transparency provided to the investors and the pink sheets or OTCBB exchanges have no reporting obligations to the investors. There are no reputed or huge companies willing to make a new move through penny stocks. These stocks are indeed considered to be highly risky due to no information available about the companies.
Hit the opportunity
Penny stocks are speculative and there is no fixed trait about them. There are a very few stocks rising from a few cents to good dollar amounts and they have made some people actually rich with their trust. PIR (Pier 1 Imports) is an example of the same which rose from $0.11 to $25 per stock within a span of four years. There was a time when everyone thought that the company will get delisted. Gambling on stocks is never a right option and it will ultimately ruin your investments. The time and money spent on penny stocks could be rather used in some other opportunity to gain success.
It is very simple to invest in the low-cost stock market but you can’t get a guarantee of higher indices over a period of time. The investor strategies have to be strong and greed has to be eliminated to end up working against the odd factors. If you think about beating the market, don’t limit your search to penny stocks. There might be many newsletters or business channel promotions for some of the paid stocks but it is up to you to choose this risky investment or look out for some other ways to invest. You can easily get good stocks in major stock exchanges in which you don’t have to invest in big numbers. Check the track record, liquidity levels and financial transparency of the company to take the right decision.