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Free List Of Penny Stocks

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This warning goes out to newbie investors, and more times than not, it falls on deaf ears. But I'll repeat it one more time just for posterity's sake: if you're new to investing, be very careful of making investments in penny stocks. You will undoubtedly be very attracted by the potential returns due to the deflated share prices, but keep in mind that things are usually not what they seem to be, and sometimes penny stocks really are "too good to be true.".

Why do pennies pose such a risk? In a word: reporting. Or more accurately, lack of reporting. Since Over the Counter (OTC) stocks are not listed on any exchange, they don't have to follow the stringent reporting criteria which we've all become accustomed to for major exchange traded stocks. What this means is that these companies generally offer very little financial guidance, and tend to rely much more on hype than exchange traded stocks.

Penny stocks usually have very small floats (the amount of shares actively traded) and for this reason, coupled with thin capitalization, the stocks can be manipulated quite easily by several buyers or sellers, and some news or rumors. Many penny stock companies use spam email to promote their products. They send out to large groups of internet users who end up becoming interested in the stocks. As the emailed people start buying, the price goes up, and the investment starts to look like a great deal. At this point, the pump and dumpers will start selling all the shares they can, and the investment will come back down to Earth. The pump and dumpers make the money, and the investors who come in later are left holding the bag.

These pump and dump schemes are extremely common, and penny stocks are almost always what are used for the promotion. Particularly vulnerable to this ruse are small and new investors who have tiny amounts of capital. Most of these types of investors want to accumulate a large amount of shares with the hopes of turning a meager $200-$500 investment into a retirement nest egg. Most end up losing their capital.

These warnings might seem obvious, but it's amazing how often people lose their head when dealing stocks. Most people feel that the number of shares is their best chance for making profits. They feel if they can but 100,000 stocks for 0.001 that somehow they'll get rich if only the stock hits 1 cent! This is true, of course, but almost never happens. Most stocks that sell for fractional pennies are more likely to stay in that neigborhood rather than to rocket to even $10.

Remember that the only metric you need concern yourself with as it relates to investing is total returns. The higher your percentage return, the more money you have. You will never end up concerning yourself with share price if you are a studious investor. It's meaningless in the final analysis. For savvy investors who do a ton of research, finding a bargain in the penny stock heap is possible. Once you've done a few trades of "normal stocks" give it a try, but lay off the pennies until you have a very good understanding of what makes share price move.

Free List Of Penny Stocks

Penny stocks are made available at a very cheap price, usually below $5 for each share. This is the main reason why a lot of people are into trading penny stocks through Pink Sheets or Over the Counter Bulletin Board (OTCBB). But this main reason which draws people to buy and sell penny stocks also has its downside. Because of this, nonexistent companies are created to scam people.

It also does not help that to be listed in Pink Sheets, a company is only required to have a broker who will quote its share prices. They are not required to furnish copies of documents evidencing their authenticity. The potential investor will not have any access to the important information needed to make sound investment decisions because of this. Therefore, the investor must educate himself very well and research about the company.

Many people have already lost millions of dollars in penny stock trading because of one main reason: they are not vigilant and cautious enough to see the warning signs that a company might be fraudulent.

In order to keep yourself abreast with quality information, you can seek the different mediums of stock information which are: your broker, investment newsletters and manuals and trade confirmations. Before you can trade penny stocks over Pink Sheets, you must enlist the services of a stockbroker who will carry out the transaction for you.

Stockbrokers are usually the best source of stock market information because they deal with it every day. If some things are unclear to you, you can contact your broker and have it explained to you. Investment newsletters are the best source for breaking news and updated information about stocks, while manuals like Moody's and Standard and Poor are a source of comprehensive penny stock information.

Lastly, trade confirmations are usually furnished by the broker to the investor. This document will state basic information such as the number of shares purchased, background information and the ask and bid price during the time of transaction.

While the best defense that you can put up against penny stocks fraud is to be well-informed, it will also help if you know the different warning signs so that you can determine if it is fraudulent in nature. Some of the warning signs that you need to look at are: high pressure sales techniques, error-filled trade confirmations and unauthorized transactions.

High pressure sales techniques are usually employed by small companies who want the cash fast and need it bad. They will not stop at anything for you to invest in their company. You must not give in to techniques like this; there is always a catch.

If you see that your trade confirmations have errors or are mismarked, it is better to clarify it with your broker. Study the trade confirmation once you receive it, and make sure everything is correct. If you find errors, bring it up with your stockbroker and have it corrected immediately.

Even if you have a broker who will do all your transactions for you, it is always better to be on top of things. Know all your transactions and keep an eye out for transactions that you did not authorize. It may be a simple mistake on your broker's part, but it can also be something that will constitute penny stocks fraud.

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About Author

Both Darren Mclaughlin & Nir Dotan are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Darren Mclaughlin has sinced written about articles on various topics from Best Mutual Funds, Cardio Training and Mobile Phone Reviews. To learn more about , please visit the

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