Penny Stocks for Dummies
Penny Stocks have successfully reeled in the adventurous speculative types for decades. However, with the recent stock market crash and overall investment disappointment, many regular investors are still not willing to put their trust and their money into he hands of the very same people who robbed them blind in 08. Therefore, usually prudent and level headed investors are trying their hand at the volatile world of pink sheet and OTC trading. The surge of newbie investors who are trying their hand at penny stock investing has been somewhat perplexing, especially considering these investors' low success rates. In order to utilize the potential of penny stocks, one must first understand the rules and drawbacks of micro cap investing.
The basic rules of penny stocks for dummies:
1. Listen to The Government.
If a company that trades on Pink Sheets or OtC Boards is legitimate, it files financial reports with OTC Markets and the SEC. The more reports you can find the more transparent the company is and the better you should feel about investing in it. Both OTC and SEC release quarterly Eligibility/ Delinquency reports in which they warn investors against suspicious companies.
2. Look for obvious red flags. If a company pays its partners and insiders in shares, has no financial history, has experienced unexplainable price swings and advertises through auto generated emails....RUN. This is a fundamental rule of penny stocks for dummies, and has no exceptions. If you have a bad feeling about a company, don't even bother trying it out.
3. Don't be fooled by online hype schemes. Going along with point number 2, don't believe any of the crap you read online except fro legitimate government approved sites. If you see a message board suggesting to buy a " hot new stock" or get an email promising to give you "first pick" and "make you millions in a matter of week", don't be fooled. While this sounds like the most obvious piece of advice, more and more naive investors are failing to recognize the telltale signs of fraud.
4.Shop around. While penny stocks may really be the best and most feasible option for you, you should try to give NASDAQ or AMEX stocks a chance. After all, listed stocks are profitable, risk free and more regulated, thus making them a great alternative to even the best of penny stocks.
The basic rules of penny stocks for dummies:
1. Listen to The Government.
If a company that trades on Pink Sheets or OtC Boards is legitimate, it files financial reports with OTC Markets and the SEC. The more reports you can find the more transparent the company is and the better you should feel about investing in it. Both OTC and SEC release quarterly Eligibility/ Delinquency reports in which they warn investors against suspicious companies.
2. Look for obvious red flags. If a company pays its partners and insiders in shares, has no financial history, has experienced unexplainable price swings and advertises through auto generated emails....RUN. This is a fundamental rule of penny stocks for dummies, and has no exceptions. If you have a bad feeling about a company, don't even bother trying it out.
3. Don't be fooled by online hype schemes. Going along with point number 2, don't believe any of the crap you read online except fro legitimate government approved sites. If you see a message board suggesting to buy a " hot new stock" or get an email promising to give you "first pick" and "make you millions in a matter of week", don't be fooled. While this sounds like the most obvious piece of advice, more and more naive investors are failing to recognize the telltale signs of fraud.
4.Shop around. While penny stocks may really be the best and most feasible option for you, you should try to give NASDAQ or AMEX stocks a chance. After all, listed stocks are profitable, risk free and more regulated, thus making them a great alternative to even the best of penny stocks.