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Message
re: Penny Stocks
Posted on 2/11/14 at 9:44 am to blueboxer1119
Posted on 2/11/14 at 9:44 am to blueboxer1119
Other than "don't" ?
ETA: In case that was overly sarcastic or unhelpful, let me put it this way: penny stocks are extremely risky (as you probably know). The reason people invest in risky assets is because of the risk premium -- as a general rule, riskier assets have higher returns because you have to pay people more money to get them to assume higher risks. This is why B rated bonds pay higher coupon rates than AAA rated bonds.
However, the risk premium breaks down at the penny stock level. They are extremely risky, but they do not provide higher returns to compensate for the risk.
LINK
They also have liquidity issues.
ETA: In case that was overly sarcastic or unhelpful, let me put it this way: penny stocks are extremely risky (as you probably know). The reason people invest in risky assets is because of the risk premium -- as a general rule, riskier assets have higher returns because you have to pay people more money to get them to assume higher risks. This is why B rated bonds pay higher coupon rates than AAA rated bonds.
However, the risk premium breaks down at the penny stock level. They are extremely risky, but they do not provide higher returns to compensate for the risk.
LINK
They also have liquidity issues.
This post was edited on 2/11/14 at 10:00 am
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