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Have you wondered if you should buy penny stocks? It's a good question. Let's look at some of the pros and cons.

A penny stock in the United States is a stock in any market that you can trade for less than $5 per share. In common conversation, however, the term can apply to any low-priced, easily manipulated stock, and it often refers to stocks sold outside one of the three major exchanges (NYSE, NASDAQ, and AMEX).

It's very tempting to get into the stock market by buying penny stocks, seeing as how they're so cheap. They have the potential to increase in value by over several hundred percent in a short time thanks to their low prices. But they also have a huge potential for steep losses for the same exact reason.

After you buy penny stocks, you may find yourself stuck with them. They can be hard to sell. Because these stocks don't have as many investors, they are usually not traded as often as the more popular and pricy stocks.

You're taking a risk when you invest in these kinds of stocks, because if you are looking into a less known exchange, the stocks may not be subject to the same standards and requirements that other stocks are. That means they are more unstable, volatile.

Because of their lesser-known status, penny stocks have become a huge area of income for fraudulent individuals. Many investors have been misled by these people through spam emails and internet message boards.

They get investors to pour huge amounts of money into a stock that has no real potential for growth, and then selling their own shares when the price rises. This scheme has a name: "Pump and Dump." It profits the fraudulent and results in big losses for the naive investor.

So, their great prices may encourage you to buy penny stocks. However, be aware of the potential pitfalls before making any investment. Know the track record of the companies you're investing in!

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