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fresh information on penny stocks
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fresh information on penny stocks
September 28, 2007 found at today's focus: personal finance at indystar.com
Are penny stocks ever a good choice for investing your money?
The allure of striking it rich by investing in overlooked penny stocks may be too much for some investors to resist, but beware of the temptation of trying to get something for nothing. Investigate these stocks thoroughly before taking the plunge, experts say. For more information, consult members of the Financial Planning Association of Greater Indiana Generally, the term penny stock refers to stock with a share price less than $5 and one that is not listed on a major stock exchange. These stocks are sold on the Pink Sheets through broker/dealers who buy and sell over the counter.
Some important issues need to be understood:
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• A penny stock is used to finance new business.
• A penny stock is considered a risky investment.
• Liquidity risk is inherent with a penny stock.
• Institutional investors rarely deal in penny stocks.
• Many broker/dealers prohibit their brokers from soliciting the sale of
penny stocks.
• A penny stock should not be a meaningful portion of a person's
portfolio.
• According to a study by the North American Securities Administrators
Association in 1989, investors lost money 70 percent of the time with penny
stocks.
• Due diligence on a penny stock by the investor is important.
With this disclosure stated, in the last few years penny stocks of some mining
and commodity Canadian companies have increased in value due to the demand for
their products from China and India.
Penny stock investors in those companies may say it is a good choice. Before
investing in penny stock, however, we would suggest you consider any money
invested is money you will not miss should you lose it.
Thomas L. Hardin | Canterbury Investment Management
A penny stock is a stock that trades for less than $1. Historically, penny
stocks have been the subject of a great deal of controversy relating to
manipulation and outright scams.
There was a popular movie released in 2000 called "Boiler Room,"
starring Ben Affleck. The movie was based on the real firm called J.T. Moran
that used high-pressure sales tactics to push penny stocks.
The lack of information and liquidity creates the potential to hype the stock,
typically through phone calls, e-mail spam and newsletters, resulting in
artificially inflating the price. When demand reaches a peak, the initiators
of the scam dump their shares, leaving investors holding the bag. This
practice is called "pump and dump."
I am not saying that all penny stocks are the subject of such scams. I would
ask why someone would want to enter into a form of speculation where the odds
are stacked so heavily against the speculator?
To answer the question, "Are penny stocks ever a good investment?" I
hate to say penny stocks are never a good investment, but I will say that the
probability of making money in penny stocks over the long run is about as
likely as winning the lottery.
Information in the above article is from sources that we believe are reliable
but cannot guarantee completeness or accuracy.
Andrew Roller | Creative Financial Centre
A lot of money can be made in penny stocks, but rarely do I feel that they are
suitable investments for most clients.
Penny stocks are typically very volatile because of their low market
capitalization and share price. They are for aggressive investors willing to
risk the loss of their entire principal. I find that most clients seek a
relatively consistent long-term growth or income objective.
If a client is risk-neutral, which means he desires to make money yet is not concerned about losing the money, penny stocks might be a suitable investment. Typically, this would be the same person who would enjoy going to Vegas and can afford to throw away money for the thrill of trying to make it.
With proper due diligence, one might make money investing in penny stocks. I
used the analogy only to point out the risk involved.
Most people love the idea of making a lot of money fast. Everyone hears the
stories of someone who was able to retire because they hit it big investing in
penny stocks. Just remember that most people do not retire because of penny
stock investments.
Financial security comes from a well-thought-out financial plan. In the plan
are goals, hard work, and time. Most "short cuts" will turn into
"long cuts" and will only push back your goals to a future date.
Securities offered through CFD Investments, registered broker/dealer, member
FINRA & SIPC, and advisory services offered through Creative Financial
Designs, registered investment adviser, 2704 S. Goyer, Kokomo, IN 46902 (765)
453-9600.
You can also find a successful trading strategy (who worked quite well with the Forex for me) at TraderBO
Divergence System. read also |
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