Penny Stock

Penny Stock Investments: Read before Investing

Stock market investments are an old and practiced by masses. Every investment is precarious, but investment in penny stocks (trading under $2.50) is much more risky as movement in these stocks is more volatile than A-grade or blue chip stocks. They are not only prone to stock market crashes, and can even crash due to non-performance of business. It is also true that majority of the penny stocks are worthless or are complete failures because of many reasons like their small size and poor management, lack of funds for expansion and more importantly lack of big investor’s interest. Hence, it is the need for investors to analyze these stocks before making your hard earned money invested in it.

Alternatively, many people find it more fruitful investing in penny stocks as favorable investment can multiply your returns. It is nearly impossible to get similar returns in A-grade/ blue chip stocks, as these small companies are growing in terms of their business and can give healthy percentage growth based on low base effect compared to big companies which are already matured in terms of business and can give only average growth in business. The stock price of prosperous company which has given favorable business growth over past three to four years can tend to increase by 80%, 150% or even by 200% to 350% within very short span of time.

The researchers need to make full analysis on the stocks before making the right choice. So, on an average, your stock selection must be intelligent enough to choose that single profitable penny stock out of 100 available stocks. Any wrong selection among can ruin your whole investment. Proper analysis on company’s profile, select penny stocks wisely balance sheet and its future business prospects can help you choosing the right stock for you. Read more about selecting penny stock wisely.

Penny Stock Investments Read before Investing

There are various sources to collect information and database regarding the companies. These are:

1) Websites: Not only company’s website, but also other websites related to stock market can be referred to get complete information about its business, financials or even its stock price performance in past.

2) Newsletters and Forums: There are various newsletters issued by websites and online penny stock forums can also be good source of collecting information. Make sure that you’ve included your email ID on a reliable website to avoid any issues. It is important to know that there are many fraud websites floating the false news about certain stocks to gain money. Investors should know the difference between right and wrong companies and make sure that they don’t get trapped with wrong companies for investment.

3) Customers Reviews: Reviews posted by customers about product, financials of company product and reviews can also be a good judgmental factor for any investor for selection of right stocks.

To summarize, Penny stocks are very risky trades but can be a positive changers for you, only if chosen wisely. Risks need to be taken for better earnings, but it is wise to choose the most appropriate methods for getting the higher ROI.

Pump and Dump Scams in Penny Stocks

Penny stocks are the most dangerous investments due to different scams and frauds associated with them. These have attained the bad status mainly due to pump and dump schemes linked up with the stocks.

Pump and dump is an unethical activity in which scammers purchase majority of shares of probably the self-created companies and then make full promotions to attract people for buying them. The share price goes up within a few days and as the stocks gain prices, the fraudsters sell off the shares, which cause collapse of share price. It leaves the stock worthless and unrecoverable. This pump and dump scheme is commonly followed in pink sheets or OTC stocks. The innocent investors get exploited by the fraudulent activity and unethical approach. Click here to know more about penny stock need consideration.

Pump and Dump Scams in Penny Stocks

Penny stock trading has attained a bad name due to such occurrences. There are many fraud companies ready to make scams for these stocks. You can identify such fraudulent companies by analyzing about them beforehand. Less information and quick decisions might not be good for penny stock investors. You can exactly follow the risk strategies to gather all information about the particular companies and make right and informed decision about investing in them. You can attain success by taking the money off from the victims of scam.

Penny stocks are not alike. There are a few companies floating the REAL stocks to gather money for a right usage. There are many low priced stocks (below $5), which have been floated on OTCBB or pink sheets and trade on security exchanges. Penny stocks include the stocks of some private companies having no active trading market. You can’t try your luck by going after the advertisements floated by promoters as there are many forum posts, blogs, FB posts and other marketing strategies followed by frauds to implement pump and dump scam.