The Problem With Trading Penny Stocks – Investor Beware


"How To Make Huge Profits Trading Penny Stocks During The First 47 Minutes That The Market Is Open!"

Most people these days are always on the look out to earn a lot of money, quick. This is one of the major reasons why a lot of online offers are promising a lot of ‘Get Rich Quick’ formulas and hype which very simply do not work, and as a result, they quickly and quietly lose the money invested. The “Make Easy Money” mentality has also reached the stock market trading arena in droves. This has left multitudes of people investing unwisely on penny stocks that may be just too risky to begin with.

So What Are Penny Stocks?
Penny stocks are stocks that are often sold for less than $5 dollars per share, or, in some cases, less than $1 dollar per share. Most of these stocks are brand spanking new offerings, having an extremely short operating history and usually has just a few million dollars or less in net tangible assets. Typically, these penny stock offers have low market caps, minimal liquidity and are most often traded on over-the-counter exchanges, such as the OTCBB.

Are Investing In Penny Stocks Risky?
Yes it is true that trading Penny Stocks are riskier than investing in regular conventional stocks. Primarily because these Penny Stock issues do not have adequate background information on the issuer, meaning they offer very limited info about the companies who originally issued them, and thus at times may often pose huge threats for legitimacy.

Beware The Lack of Background Information
Chances are, if these public companies are willing to trade these stocks in such small amounts, most likely they have little business history or may have a negative reputation. These companies are either just starting out or they may have experienced some form of bankruptcy in the past, thus they have to resort to selling their stocks at low prices.

Since there is very little corporate information available on the majority of these penny stock companies, there is a very good possibility that you may be making a bad investment. Thus, you may end up losing more money than you planed on earning.


So Why Is There Such Limited Information
Well, simply because they don’t have to. Most of the companies that offer these penny stocks, very little information is disclosed for potential investors to view online or anywhere else. After all, most of the exchanges in this market operate on the OTCBB or the Over The Counter Bulletin Board, which does not require thorough detailed reports by companies for public viewing.

But without this valuable information, it would be difficult for the investor to make the proper objective trading decision, and this often leads to unwise uneducated guesses.

How Risky Is Buying Penny Stocks
It isn’t that uncommon for some penny stocks to be promoted by individuals who has been paid or hired to do so. You may have even received spam emails that sound just a little too good to be true, encouraging you to invest in a particular “HOT” penny stock. Now remember the mentality of these stocks, that most successful public companies out there did not start out by offering penny stocks.

The usual scenario that occurs is that a company may buy quantities of a certain penny stock and then distribute emails telling potential investors that a certain stock is doing well in the market. A lot of people in the “Get Rich Quick” mentality will often respond to this by investing in these stocks, causing the price to shoot up. The price escalates due to supply, demand and hype. After the price spikes up, the original promoter then sells his share at the inflated price for a huge quick profit before the price dramatically drops back down, resulting in the investors to lose a lot of money.

Although there is potential for growth in valid penny stock offerings, the risks involved are a lot greater than buying conventional proven, “Blue Chip” stocks.

Most often, if you are not familiar with the “Penny Stock” issuers business background, or you employ the “Get Rich Quick Mentality” to hopefully profit on your stock investment portfolio, there is a chance you may be a victim of one of these questionable offerings. Buyer Beware.

"How To Make Huge Profits Trading Penny Stocks During The First 47 Minutes That The Market Is Open!"

Leave a Reply

Your email address will not be published. Required fields are marked *

error: Content is protected !!