Investors Fall In Line Into Risky Penny Stocks

Pennies on a stock chart © Tetra Images, Getty Images

“A lot of these people, who were looking from afar, are coming back,” Chambers said. “It feels like somebody pulled a switch.” The rebound also comes as individual investors are showing signs of increased interest in stock trading in general. Discount brokers TD Ameritrade Holding ( AMTD ) and E*Trade Financial ( ETFC ) last month reported jumps in daily trading volume in the first quarter from the same period a year ago.

The rising volume in the tiniest of stocks is taking more investors into what is arguably the riskiest part of the stock market.These companies have less regulatory oversight than those traded on the exchanges, and their low prices mean that small price moves can quickly add up to big percentage moves. In addition, penny stocks are often prime hunting grounds for scammers and “pump and dump” schemes.

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