Dec 31, 2020 at 8:00AM
We've all probably been tempted to buy penny stocks at some point in our lives. Penny stocks seem attractive because we're used to seeing small things grow into big things, and it's tempting to think a very low-priced stock has greater potential to outperform than large-cap stocks.
The reality, however, is that penny stocks may not be well-capitalized, and they're usually the first to crumble under the weight of crises and competition. And don't be misled by a low valuation -- it may be justified because of some flaw in the company's business model. It's good to remember that low can always go lower if the company falters and sputters.