I am thinking of buying some penny stocks. I recieve the penny stock chaser alerts on my email and the returns lately have been great. I know they are volitile, but no risk no reward right? Do any of my fellow T-Netters know about hidden pitfalls here? Has anyone here actually traded in penny stocks. Thanks
When I first started investing about 11 years ago, I thought penny stocks were they way to go. Sure I invested in penny stocks. I've made some money and I lost money. Which penny stock I invested in are irrelavent but be prepared for ups amd downs, hypes and don't beleive everything you hear or read about press releases. Penny stock CEO's lie like hell when thy put out press releases to encourage potential investors to buy their stock. Pink Sheets and OTB-BB stocks not subject to the same standards as regualar stocks on the excange so beware of that. They don't have to report earnings and are not required to do much of anything. Here's a good thing to know that I found the other day, and I'll pass it on to you...................
Why We Love Wild Penny Stocks
By Tim Hanson and Brian Richards
November 7, 2009
Penny stocks have huge potential -- that's their blessing and their curse. The potential rewards are enormous. In fact, pennies have been the best performers lately. Everybody loves pennies. It's the potential of quick gains in "cheap" stocks that keeps investors coming back.
According to the Securities and Exchange Commission, the term "penny stock" generally refers to low-priced (below $5), speculative securities of very small companies. To quote the SEC: "Investors in penny stocks should be prepared for the possibility that they may lose their whole investment." (It's worth noting that the emphasis in that last sentence is in the original.)
Pay attention to the SEC's entire definition, not just the stock price. Regardless, the SEC is spot-on when it says that true penny stocks are among the surest ways to lose money in the stock market.
Well, then, why do we love penny stocks? We love penny stocks because they're fascinating. The world of pennies is inhabited by hardworking average Joes and Janes hoping to strike it rich, as well as by pumpers and dumpers, hypesters, and scammers. In pennies, the logic and reason that applies in the rest of daily life is replaced by zeal and prayer.
However, we don't love them enough to actually buy them. Yes, they have big potential, but their daily gyrations are unpredictable -- the stock-price movements have next to nothing to do with the underlying company the stock represents. In fact, trading in pennies is highly illiquid, and prices are often manipulated by forces not at all related to the business.
The dangers of incredible promises. If you're buying stocks without paying attention to the businesses you're buying, then you might as well be buying a lottery ticket. Or, to use another analogy, you might as well buy up every baseball card of a benchwarmer on the Akron Aeros Class AA baseball team and hope that he someday rises up, fulfills his potential, and becomes an all-star for the big-league Cleveland Indians.
That just about sums it up. Be careful and good luck.................Rich
