Don't Waste Your Money on Penny Stocks, these 3 Stocks Are Better Buys

It's easy to understand the visceral temptation of investing in penny stocks. Because they trade for less than $5 a share -- and sometimes less than a buck -- relatively small increases in their share prices may produce large percentage gains for those who hold them. And at those prices, even investors without a large amount of money to deploy can buy a fair number of shares.

However, it's important to remember why penny stocks are so cheap in the first place. These companies may be young and unproven. Or such a low-priced company may have been in operation for years, but have experienced significant deterioration in its business, or lost its competitive edge.

Contrast this with larger, well-established companies that are trading at higher prices. Although in a strictly per-share sense, such stocks are less affordable, their businesses are more likely to be on a strong growth trajectory, justifying their higher valuations.

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Source Fool.com