Things You Should Know Before Investing In Penny Stocks
Things You Should Know Before Investing In Penny Stocks
Penny stocks are stocks that are priced below . They are usually traded on Pink Sheets or Over the Counter Bulletin Board (OTCBB). In order for a company to be listed in Pink Sheets, they must have a broker to quote their share prices. Pink Sheets is not registered by the SEC and is not affiliated with any stock exchange or NASDAQ.
Companies that are usually listed on Pink Sheets are those who are just starting out and have not yet developed to meet the basic requirements needed to be publicly listed.
What are the advantages of investing in penny stocks?
The main advantage that an investor can get from penny stocks is its low price. You can buy thousands of penny stocks for a low amount. Also, Pink Sheets and OTCBB are very easy to get into as opposed to the regular stock exchange companies. Also, you may not know it, but it is possible that you are investing in the next big company which will bring you a substantial amount of financial wealth.
What are the disadvantages of investing in penny stocks?
The main disadvantage when it comes to investing in penny stocks comes from dealing with companies who are offering them. Pink Sheets only requires a company to have a broker in order to be publicly listed. No financial and incorporation papers are needed to prove the authenticity of the company. You will have no means of getting information about the company. You will have to research on your own and check out the background and financial standing of the company. Another disadvantage is that penny stocks entail a higher risk compared to other securities.
What are the warning signs of penny stock fraud?
Since Pink Sheets and trading Penny Stocks is very easy to get into, it can be a paradise for scammers. There are already many people who have fallen victim to penny stock fraud and as an investor; you must be able to know the different warning signs when it comes to penny stock fraud. Some of the warning signs that you have to be on the lookout for are unauthorized transactions and mismarked trade confirmations. Even if your stockbroker is handling all the transactions, you should also be aware of everything that is happening.
At the end of every transaction, your broker will provide you with a trade confirmation that will be the evidence for the transaction made. In this trade confirmation, you will find basic information like how many shares were brought for how much, the ask/bid price at the time of the transaction and other background information.
If you see that there are wrong information inputted in the trade confirmation, call the attention of your broker and have it changed immediately. Also, if you see transactions being made in your account without your knowledge, notify your broker. It may be an honest mistake, but it also can be a potential penny stock fraud in the making.
The best thing that you can do to combat penny stock fraud is to be well-informed and be vigilant when it comes to approaching penny stock trading.
Nir Dotan is a writer and promoter of
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Pros and Cons of Investing in Penny Stocks
Pros and Cons of Investing in Penny Stocks
When you think of trading penny stocks, the major stock exchanges normally come to mind. Such as the the New York Stock Exchange (NYSE), the National Association of Securities Dealers Automated Quotations (NASDAQ), or the American Stock Exchange (AMEX).
What exactly is a penny stock?
A Penny stock is a low priced security for a small company with a market capitalization of under 0 million and usually traded in very low volumes and amounts. Penny stocks also trade on other OTC or “other the counter” exchanges, like the OTCBB and Pink Sheets.
Due to the low trading volumes, penny stocks are a profitable investment option that comes with a sizeable amount of risk.
According the Securities and Exchange Commission, potential investors in penny stocks should be aware of the fact that due to the low trading volume of these stocks, it is possible that an investor won’t find a buyer for their shares. Finding accurate price quotations are also difficult making it a strong possibility that an investor can lose their entire investment. This is the inherent risk.
Penny stocks do carry a certain appeal for adventurous investors.
Chances are however, a new investor looking for a potentially lucrative short term investments with a low starting price will run across the penny stock.
The allure and excitement comes from the fact that at such low prices any changes are often measurable in hundreds of percentage points in a given day or two. An investor’s stock value can literally grow to double or even triple the original investment amount!
Conversely, the price of penny stocks can plunge in value just as quickly. New investors would do well to avoid making penny stocks a major part of their portfolio.
Also, due to the low listing requirements on exchanges like OCTBB and Pink Sheets, many companies are not really considered safe investments.
Many of the companies listed on alternative exchanges do not have enough financial history to be able to accurately determine if they would make a good investment or not.
In some cases, these companies that are considered to be penny stocks are either new companies or are in some cases dangerously close to failure.
Unfortunately, some new day traders have even taken to artificially manipulating the stock prices by buying up large amounts of a stock which in turn, convinces individual investors of the need to buy.
As most of these stocks are not in great demand, an investor will have to lower the asking stock price in order to entice an investor, often at a financial loss.
Not every company that trades for “pennies” on the stock exchange should be considered fraudulent, however. Some are simply small companies trying hard to grow their business and are working to get up on the larger market exchanges. Searching through the fraudulent companies to find the truly reputable companies capable of helping an investor turn a large profit may not be worth it.
Investors with low investment income may be convinced that just one good trade can double their investment, but in the end an investor is better off choosing an investment from a company that they have researched thoroughly and are convinced that this company’s stock pricewill grow.
Thank you for reading my article,
Cheers!
A list of penny stocks and tools useful tools are provided by Michael at http://pennystocksforprofit.com. Michael resides in Atlanta, Georgia.
Penny Stock Specialist editor Frank Curzio shares his Secrets & Strategies on how to purchase the best growth stocks for under . A “Hitch a Ride” company is a low priced company that has close ties to a large-cap / high priced stock. In other words, it could be a supplier / or service provider for a large company like Google or Research in Motion. So when the large company does well, these low-priced companies also benefit or essentially hitch a ride on the back of the bigger company. In this video, I will show you a way to purchase Apple – one of the fastest growing large-cap stocks in the world – for under . This small semiconductor company is now a supplier to the new iPhone – which was launched a few months ago. If iPhone sales continue to surge, this small “hitch a ride” stock could double from the current price. About Frank Curzio: Frank is the editor of the Penny Stock Specialist. Published by Stansberry & Associates, Penny Stock Specialist is a new investment advisory uncovering the best-kept penny stock secrets. Frank Curzio also hosts S&A Investor Radio, a weekly podcast offering unscripted commentary and interviews from Wall Street to Main Street. Also check out the Penny Stock Specialist Facebook page: bit.ly
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How to Invest in Penny Stocks ? Investing in Penny Stock Education is the Key
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The first step in investing in penny stocks is getting the money. Penny stocks are part of a very volatile market. They are usually stocks of small cap companies and thus are more prone to volatility to industry changes and the stock market sentiments.
However, you can also make a great deal of money in a short time with penny stocks compared to other financial instruments such as bonds, mutual funds and even blue chip stocks.
If you are facing a serious financial crisis, are putting three children through college all at the same time, or still have mortgage payments to attend to, it would be better for you not to invest in penny stocks. Likewise for people who are more conservative and not willing to take risks with their money.
It is better to deal with penny stocks when you have enough disposable income laid aside. If not, go for more stable investment opportunities and leave the penny stocks to those who can afford to lose a few dollars without weeping.
Start by educating yourself, especially if this is your first venture. Subscribe to mailing lists and monitor investment returns regularly, to know which companies are doing consistently well and which ones aren’t.
There are several well known penny stock newsletter such as Michael Cohen Doubling Stocks that provides penny stock picks every week.
Knowing the in and outs in penny stock investment is essentially the most important thing that you need to learn if you want to make money with penny stocks; that, and learning not to trust email scams and stock trading robots.
If you have the money to spare, test the water with low risk sums. This way you only get to feel a slight pinch if and when you lose the money.
There are also several penny stock trading courses online that provides a basic as well as advanced levels of investing. These provide crucial knowledge for you to trade proficiently.
If you want to know more on how to make money with penny stocks, get yourself acquainted with someone who is an expert in any form of stock trading. Choose someone with good reputation to teach you the ropes so that you can get yourself a stable footing even as you start out.
If you want winning and hot penny stock picks that are delivered to you every week, i recommend Michael Cohen Doubling Stocks Newsletter. Read my Doubling Stocks review and discover how it can help you earn money on autopilot.
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Investing and Trading: Spammage, Penny Stocks and Mail …
My Daily Blog is at: investorandtrader.blogspot.com If you really want to know what the world of penny stocks is all about? You should be listening to Timothy Sykes. Not to what you receive in the mail …NOTE: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research.
