Debunking 4 Common Penny Stock Myths

When it comes to investing in the stock market, a common area to immediately look is penny stocks. This is because there are a few success stories when it comes to penny stocks, specifically about how some people invested very little only to find that the company exploded and made them millions. It is true, you can make a lot of money with penny stocks but there are a few myths that seem to linger around the internet.

These are conjured by both the sceptics that have not had success with penny stocks and millions who gambled and won. There are both positive and negative myths and, in this article today, we will be debunked 4 common penny stock myths that you may believe.

There is no liquidity in the penny stock market

When it comes to penny stocks, they are often seen as a risky venture because of their low liquidity. In many cases, individuals will preach how there is no liquidity in penny stocks and the share price will be spinning wildly out of control. Of course, this is not always the case and there penny stocks available that can have stable share prices. You just have to look for the right signs before investing. In most cases, look for penny stocks that are trading high volumes of stock on a daily basis.

Penny stocks are 100% risky and you can’t make money with them

This one is a classic. There is so much hype about penny stocks these days and this has developed a lot of haters. This, as a result, has led to individuals slandering penny stocks, claiming that they’re a waste of time and have way too much risk. I won’t dumb is down with you, penny stocks are risky but by no means are they impossible to make money with. You just have to have the right mindset and you need to know the right things to look for. If you have little knowledge about penny stocks and are not sure what you’re doing, do the research and learn as much as you can.

Penny stocks are new companies that are about to make it big

This, again, is the result of the hype that occurs through all these “gurus”. Let’s get this one crystal clear, not all penny stocks are going to be amazing stocks that will match the likes of Apple and Amazon in a few years to come. There is a common misconception that all penny stocks are going to grow into massive companies but this is simply not true. Many of these companies will fall to zero and will go bankrupt. Most of them are startups and this can lead to a rocky start. That is why it is important to know the signs and trade effectively and intelligently.

All Penny Stocks are Scams

I will start by saying this, most of the penny stocks you see are scams (unfortunately). However, by no means are all of them scams. There are some legit companies available for trading that, if done correctly, could make you a lot of money. However, penny stocks have been a pain for the SEC for years because of the scams that are designed to separate traders and their hard-earned cash. For a few tips, look out for bias recommendations and offshore brokers.

Conclusion

Penny stocks are a great way to make money but there are a number of myths that circulate the area. These have been developed throughout the years and are overhyped to scare off people and, to be honest, it does tend to work. However, we urge you to not be afraid of penny stocks as they can provide a number of benefits and profits. Just stick to your methods and know how to trade and, eventually, you will find success.