Board Thread:Watercooler 2.0/@comment-6198648-20130228045108/@comment-6209322-20130827002834

I am afriad I have to disagree with you there... First off, I want to make sure we are talking about the same thing, because a 'Penny Stock' is not the same as "a Stock that trades for less than $1.00', and this is not just my distinction, wiki's penny stock page notes that stocks such as CitiGroup that trade for less than $1 but do so on the NYSE (like Dow Jones or S&P500) are not Penny Stocks.  The risk or lack of risk is majorly affected by how trustworthy the company is, and companies that trade on the NYSE are more regulated, and thus have to be, at some level, somewhat trustworthy.

In any even, assuming the initial ammount invested to be equal, the odds of a $100 stock plummeting to $50 in a day is not as likely (it happens, to be sure, but it is not as likely) as a $.10 stock dropping to $.05... and if you invest $100, it doesn't matter whether you buy one share of an expensive stock or one-thousand shares of a cheap one, the difference in terms of money lost is the same. So while it is true that the risk of a stock collapsing is based on the trustworthyness of the company, not necessarily the value of the stock, it is often the case that many of the less trustworthy companies avoid the NYSE (or are not allowed into it) and sell their stocks in other markets at low prices. It's the probablility we are talking about here, not any given specific case or cases.