What drives people to make risky investments such as penny stocks?

There have been people who have lost everything to unscrupulous brokers who sell house stocks to whoever they can con out of their money. Oh yes, they refuse to buy the stocks back and sell their stakes leaving the people with the loss. It's like a MLM scheme from hell really.

Two things, ignorance and greed. If anyone falls for this kind of scheme, you have to question their sanity!

One word...greed.

They listen to people and hear that they can make a lot of money and they do not do due diligence on their investment. It is gambling really.

If you lose everything from investing in penny stocks, then you must not have had much to begin with.

Probably penny share investment magazines. The lower a share price the greater the possible reward but the greater the risk as well. Spreads are also very high Price movements erratic and often sudden. You need to keep and eye on them at least every day.

are you talking about OTC stocks? (pink sheets)

People, want to get rich, and the less experienced they are, the easier it is to get them to throw their money at stupid investments.

If you have $500, or $1,000, you are not interested in 10% return, Which is a high return. they want to double and triple their money, by tuesday.

So they buy into the best story they hear, or the first story they hear. They don't understand the Huge four letter word "R I S K "
or the 6 letter word "S U C K E R "

Learning to invest, for these people, is an EXPENSIVE education.

I invest in penny stocks, rarely because I find most are genuinely not worth even their low price, but sometimes, I do find good prospects, but I will admit to having been burned badly by not doing my research on a few occasions. I hope I'm wiser now.

Recently, I made just over a thousand dollars as a short term gain on a pharmaceutical company with a marketable product already in production and able to be shipped. I would have made about three thousand if I'd held my million shares bought at $0.0007 as they topped out recently at about $0.0035 or so, but I sold them at $0.0018 because I got skittish when the trading volume reached a certain level on a particular day where they were going up in price rather rapidly. (I'd wanted to buy more shares at $0.0007, but nobody wanted to sell me more shares at that price.) I'd have no qualms about buying the same company's stock again if it got to a reasonable level for me. I do think the company has a good future, but currently, the price on the stock is a bit high for my investment philosophy with the level of risk inherent in such a stock.

At the same time, I have lost big money with penny stocks too, but thats when I truly hadn't done a good job of researching the companies I was investing in, one of which turned out to be quite a fraud scheme. As they say, "buyer beware", and look out for yourself, because in the penny stock and sub-penny stock market, nobody else will.