Have you seen stock advertisements like this online that make fantastic claims?

I see them all too frequently and while I don't know whether they are scams, I do know that penny stocks are very dangerous. For the ad above, I clicked through to the site and immediately went down to the bottom of the page looking for a disclaimer or terms & conditions section.

I found a Disclaimer link and was taken to a page of solid legal writing but I didn't have to go far to find something very interesting and very scary. The VERY FIRST sentence on the disclaimer page was this:

Clearly this is NOT something you want to read before you pull out your wallet to pay for some penny stock picking system or sign up to their newsletter. You can lose YOUR ENTIRE INVESTMENT!

That, in a nutshell is why penny stock are so risky. They shouldn't ever be bought by beginners and yet so often they attract a beginner's attention because they are cheap. Ads like these are good at getting the attention of novice investors and those are the very people that should stay as far away from penny stocks as possible.

My advice would be to resist the temptation of clicking on an ad like this and to NOT sign up for any newsletter. You will just get in trouble and probably lose money if you get involved later on. Instead, go out and buy a copy of The Stock Market For Dummies and learn the basics of stock investing so you can put your money in stocks that have a chance of going up and making you money!