It is no secret that the stock market is not a safe place to invest your money into. The probability of doubling whatever you have is equal to the probability of losing all your money, if we think rationally it is exactly similar to gambling and the stock market is a casino. Jeremy Renner once said that he would never be in stock market. According to him, stock market is just a place for gambling. He went on to say that, he was only a gambler, but he would practice common sense when it comes to gambling. This quote shows how this game has a higher risk of losing than any other does. Fraud has been very common in stock market especially with penny stocks.
These stocks also known as small caps are shares of any company that trades for less than $5.00 per share.
These stocks are mainly traded at the New York and American Stock Exchanges. There are a number of huge, highly successful companies that have a share price under $5.00 per share. In fact, companies such as Microsoft and Apple were a $5.00 stock at one time! A penny stock does not mean the company is not headed to success in fact the most successful companies of the world at one time or the other were in possession of such shares. This is one of the reasons investors are so interested in bidding on such shares and taking a risk on them although the chances of fraud and failure are very high but if they succeed, it is a way to earn profit fairly quick.
The security of such shares is not very high although measures have been taken by the governments and laws in different countries. Given their prices, it is very easy for even the common people to buy them in abundance and create a hype to attract more buyers. All this has led to the investors becoming more cautious about the transactions they make and try to avoid penny stocks to the maximum.