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How risky are penny stocks?
Penny stocks are only appealing to the brokers who sell the penny stocks and the companies selling "penny stock signals!". Generally penny stocks provide abysmal returns to the average investor (you or me). In "The Missing Risk Premium", Falkenstein does a quick overview on average returns to penny stock investors citing the following paper "Do Investors Overpay for Stocks with Lottery-Like Payoffs? An Examination of the Returns on OTC Stocks". Over the 2000 to 2009 time period, average investors lost nearly half their investment. A comparable investment in the S&P over this period would have been flat see here. There is a good table in the book/paper showing that the average annual return for stocks priced at either a penny or ten cents range from -10 percent (for medium volume) to -30% to -40% for low or high volume.  A different paper, "Too Good to Ignore? A Primer on Listed Penny Stocks" that cites the one above finds that listed, as opposed to OTC "Pink Sheet" penny stocks", have better returns, but provide no premium for the additional risk and low liquidity.  The best advice here is that there is no "quick win" in penny stocks. These act more like lottery tickets and are not appropriate for the average investor. Stear clear!