Why in the World would someone invest in a penny stock that is only worth a small fraction of a dollar? Simple, the potential for return is great even if the company being invested in does not have a great product or service. Most companies that go public do have something of value but that does not necessarily mean great gains.
You see investing is part intelligence and part following the hype. A great company does not necessarily mean a great investment unfortunately. Penny stocks are no different. You follow the hype and you profit if you time your investment right. I same time it right because the hype can fade just as quickly as it was created.
So we are attracted to penny stocks because they are exciting. The possibility of earning 200,000 dollars from an investment of 1000 dollars in a stock with shares initially priced at .005 and now worth 1 dollar is very exciting. Its rare to come across those kind of gains and stocks already price well in the dollar range.
There have been many fortunes made with penny stock investments both legal and illegal, which brings up another point. Beware of unscrupulous penny stock promoters looking to make a quick buck. They will tell you a stock is hot and quickly sell the shares they owned in that company after you have just invested. However, there are trustworthy promoters and they should be taken serious.
Of course exciting things usually come with their risks. However, if your risk tolerance allows for penny stocks to be an investment option then go for it. No one can blame you for being excited about a stock that has the potential to bring exponential returns.
There will always be an attraction to penny stocks so long as there are stories of people gaining a windfall of cash from a relatively small investment. Making 100 percent or more on your money is hard to ignore.
On a side note, never invest more than you are willing to completely lose. You certainly do not want to lose all your money just because of the excitement of investing. Never beleive that any stock is a sure thing. Play with the houses money.
Penny stocks have a lure that no other type of stock has. Its not just a matter of being worth pennies on the dollar but also a synergistic energy that comes from the stock market as a whole whenever any kind of attention is directed toward a penny stock.
So go ahead and have some fun with some money you can afford to have fun with.