How Risky Are Penny Stocks? January 20th, 2010 The Dean has made a promise that CollegeStock will continue to bring educational content, stock market commentary, and profitable penny stock picks to the entire student body in 2010. The Dean has suggested some Mistakes to Avoid When Trading Penny Stocks, in addition to tips on how use different stock market resources to Find the Most Active Penny Stocks. But, trading penny stocks carries risk—otherwise there would be little to no potential of rewards in the form of penny stock profits. So, how risky are penny stocks? Here are some factors The Dean believes play a role in why penny stocks are perceived as high risk investments. First off, and The Dean has reminded his students about this on several occasions, there is a huge difference between trading penny stocks and investing. Nevertheless, whether you buy and hold a stock for two days or two years, the risk is still present. Penny stocks, or stocks trading over the counter, will always be risky because There is often limited or incomplete information available to the public Many stocks lack a record of their past performance (not that you can necessarily trust previous stock prices or company performance in the pennystocking game) Especially with lower-priced stocks, or sub-penny stocks, investors accumulate a large volume of shares and, oftentimes, it’s hard to sell out of your position There’s no strict regulation and standards for penny stocks. This is particularly true with stocks trading on the pink sheets but can also be true for bulletin board stocks as well. However, penny stocks are full of potential that keep many investors coming back every day. So, if you decide you want to get involved in trading penny stocks, The Dean urges any CollegeStock student or visitor to do their homework, weigh their individual financial risks, make calculated decisions, and learn to realize losses instead of just chasing penny stocks. Next, check out The Dean's penny stock picks that have made huge gains.