NIO - About to Buy Penny Stocks? Look at These 3 Companies First.
The temptation of getting rich quick drives many investors to consider penny stocks, and that can be a huge mistake. The markets for buying and selling penny stocks is illiquid, easily influenced, and highly speculative -- all factors that make successful penny stock investing difficult. If you're looking for high-upside stocks and are willing to take some risk, three Motley Fool contributors have companies you should consider before buying penny stocks: Booking Holdings (NASDAQ: BKNG), ANGI Homeservices (NASDAQ: ANGI), and NIO (NYSE: NIO).
Brian Feroldi (Booking Holdings): I know firsthand just how tempting it can be to buy penny stocks. I focused exclusively on buying them when I started investing because I mistakenly believed it was better to own lots of shares of a $1 stock than just a few shares of a $100 stock.
My instincts were dead wrong. Nearly every single "cheap" stock I bought ended up losing me money. Why? Because they tend to be lousy businesses that aren't profitable and have no competitive advantage. Wall Street punishes these bad businesses by knocking down their share price to under $1.