3 Reasons to Stay Far Away From Penny Stocks

Buying stocks often means plunking down hundreds or even thousands of dollars for a single share. On the other hand, if you invest in penny stocks, you won't have to spend a lot to build a portfolio. Penny stocks typically trade for less than $5 per share, and some can even be had for under $1 a share. Tempting as it may be to load up on penny stocks, there are three good reasons to keep your distance.

Although some penny stocks trade on major public exchanges, most trade over the counter via a dealer network. That means many of the companies behind penny stocks aren't subject to the same reporting requirements as those whose stocks trade on, say, the New York Stock Exchange. It can thus be difficult to pull up financial information on the companies you're buying. If you can't do your research, how are you supposed to feel confident in your investment?

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Source Fool.com