In my years trading stocks, I've seen so many young gamblers calling themselves investors throw their money in penny stocks
with ignorant bliss. But I'm yet to see any of them actually make money. The reason is simple. The argument that penny stocks
are a good investment because they are cheap is meaningless because the price of a stock alone is irrelevant. It's the price against its value that matters. If a stock valued at a hundred dollars sells for eighty dollars, then you can call it cheap because of its upward potential. The OTC market where penny stocks
are traded is unregulated, so the price of these stocks is easily manipulated. They also have no liquidity, so the spread alone will eat up a significant percentage of the price. You'll also have to pay a commission that is out of proportion of the price. The only people who make money out of the OTC market are those who sell advisory newsletters with false promises of quick gains, and shady companies that pump-and-dump their own stocks. However, I have to admit that losing your money in penny stocks
is far more exciting than sending a check to the IRS.