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8 Penny Stocks To Avoid
By: Peter Leeds
There are many good penny stock investments available, which could turn a small
amount of capital into a small fortune very quickly. However, to discover these
you need to know what to look for and what to avoid. When searching for that one
big payoff, steer clear of the following examples.
The Phone Salesman - Anyone who is attempting to sell you investments over the
phone should be considered an enemy. They have high-pressure sales tactics, and
effective, believable arguments. However, they are not doing you any favors, no
matter how good they make an investment sound.
They are operating in their best interest to dump over-the-counter stock on you,
and the money you pay in will go into their own pockets, or the pockets of their
company.
There has never been a need for good companies that are going places to resort
to these type of tactics, but there has always been a need for poor, sinking, or
shady companies to do so. If you choose to ignore this advice you deserve what
happens to your investment.
You may also run into difficulty trying to find a buyer for your shares once you
decide it is time to sell.
Very Low Volume Stocks - Without much trading activity it becomes increasingly
difficult to buy or sell for the prices you want. As well, it becomes nearly
impossible to get an understanding of where the stock price is heading, or to
calculate fair valuations for the company’s stock price.
Not only that, but companies subject to low trading volume generally do not have
a lot of positive interest.
The Hot Tip Stock - There are actually professional promoters who make a very
good living generating and nurturing rumors about some penny stock that’s
guaranteed to go through the roof. The entire concept hinges on the rumor being
spread from person to person, at the office, over the phone, or at social
venues.
The promotional ploys can be very costly for investors who get involved without
special knowledge about the company or the actions of the promoter. In most
cases if a stock really is going through the roof you won’t hear a word about
it, because a select few individuals will be very intent on keeping the
information to themselves.
Guaranteed Performance - If a stock is guaranteed to go up, it will almost
always go down. Nothing is ever certain, especially on the stock market. When
someone guarantees certain performance out of a stock, they may be a promoter,
naive investor, self-serving broker, or have heard the guarantee from another
source. In any case, don't believe them. Instead check into the company yourself
and if you feel it is a good investment, you may want to proceed.
Sinking Ships - When a stock has dropped a lot you may think that, "it can’t go
any lower," or that it is "a good bargain." Especially with penny stocks, you
need to avoid this type of thinking because many sinking ships don’t ever
rebound, and they can go lower, and they aren’t good bargains just because they
cost less than before.
Commission Free - If you are interested in getting stock commission free you may
think you are saving money, but it generally means that you are buying over the
counter stock directly from a promoter or the company.
Either way, they take their own invisible ‘commission’ from you, either by
selling to you for an arbitrary amount which is unfairly high, or selling to you
for the asking price rather than the bid price based on their own current
valuations.
International Penny Stock - We’re not talking about living in the U.S. and
steering clear of Canadian stock, or vice versa. We are talking about penny
stock issues from Africa, Australia, European, Russian, or South American penny
stock markets. First of all, you won’t be too impressed with the level of
investor protection and exchange honesty in some of these regions, and you most
certainly won’t be too impressed with the broker fees you incur when trying to
purchase internationally.
Besides, if you can’t find good penny stock investments in North America, you
won’t be able to find them anywhere else either.
Warrants and Rights - These are not technically stocks, but instead are
derivative investments based on an underlying company's shares. However, they
often appear like penny stocks because they sometimes get listed in the stock
pages, and often trade for pennies.
It is unlikely that you will accidentally purchase derivatives, but make sure
you know what you are trying to buy by understanding the listing criteria of the
paper you are reading, or verifying your purchase with your broker.
To get free information about investing in penny stocks visit
http://www.pennystocks.com They offer information on the definition of penny
stocks, getting started, benefits, risks and how to find a good penny stock.
About the Author:
Peter Leeds, one of North America's leading Investment Coaches, is a self-made
millionaire who has created his fortunes on the stock markets. He has also
empowered thousands of individuals to do the same. His personal success and
incredible ability to consistently pick money-making stocks has earned him a
loyal following of successful investors and has generated significant attention
from the financial world. |
