Investing in penny stocks is extremely risky. In essence, there are several risks:

That a Company will Go Bankrupt or will Simply Disappear From Exchange

If the company's stock is so low valued that it does not even reach a dollar, there's a very real possibility that the company will go under or will drop off the map entirely, taking your investment with them.

Dishonesty Among Penny Brokerage Firms

Some firms charge a markup or even make stock purchases without your consent. Some will try to influence your buying or selling by absenting themselves when you wish to sell a rapidly dropping stock. While these practices are illegal, there are many brokerage firms that have been accused of unjust practices. In many cases, you cannot simply buy penny stocks from your regular broker. Many penny stocks do not appear in the newspaper alongside other stocks and most are sold over-the-counter. Many investors will also advise you strongly against investing in the stocks. Therefore, you may need a penny brokerage firm in order to buy and sell your stocks. You will have to be very careful before deciding the person whom you are going to trade with. If you are not, you may be overcharged, manipulated, or otherwise even defrauded.

It will be Difficult for You to Find Information about Penny Stocks

The companies offering penny stocks are often very new or may not be completely established yet. Plus, information about most penny stocks is currently not easily available to the public. This means that in order to get the current price and volume information of your penny stock you'll have to rely on penny brokerage firms. Most firms only offer information about the stocks that they offer. This means that there's no one concrete source of information about all penny stocks and it also means that you must rely on a brokerage firm in order to get information about your stock. You may even have a hard time getting a list of penny stocks from anyone but a brokerage firm -- may charge you extra money for extra information.

If someone offers you a list of penny stocks, you may be intrigued about the possibility of making money with such a small initial investment. While the best penny stocks can bring you profits, you need to be aware, as an investor that most penny stocks simply disappear after being purchased. If you do decide to invest in penny stocks, you y must choose a very reputable brokerage firm and you must be prepared for massive losses. However, if you select your stocks carefully and do get one or two winners, you will enjoy incredible financial success with a very small initial investment.