Due to their lack of liquidity, large bid-ask spreads or price quotations, and small business sizes, penny stocks are sometimes considered very speculative. In other words, investors may lose a significant portion or perhaps the entire amount they invested. Typically, penny stocks have higher volatility, which means there is a greater potential for profit and, therefore, a greater risk. By buying penny stocks on margin, which involves borrowing money from a bank or broker, investors run the risk of losing their entire investment.