Things You Should Know Before Investing In Penny Stocks
Penny stocks are stocks that are priced below $5. They are usually traded on Pink Sheets or Over the Counter Bulletin Board (OTCBB). In order for a company to be listed in Pink Sheets, they must have a broker to quote their share prices. Pink Sheets is not registered by the SEC and is not affiliated with any stock exchange or NASDAQ.
Companies that are usually listed on Pink Sheets are those who are just starting out and have not yet developed to meet the basic requirements needed to be publicly listed.
What are the advantages of investing in penny stocks?
The main advantage that an investor can get from penny stocks is its low price. You can buy thousands of penny stocks for a low amount. Also, Pink Sheets and OTCBB are very easy to get into as opposed to the regular stock exchange companies. Also, you may not know it, but it is possible that you are investing in the next big company which will bring you a substantial amount of financial wealth.
What are the disadvantages of investing in penny stocks?
The main disadvantage when it comes to investing in penny stocks comes from dealing with companies who are offering them. Pink Sheets only requires a company to have a broker in order to be publicly listed. No financial and incorporation papers are needed to prove the authenticity of the company. You will have no means of getting information about the company. You will have to research on your own and check out the background and financial standing of the company. Another disadvantage is that penny stocks entail a higher risk compared to other securities.
What are the warning signs of penny stock fraud?
Since Pink Sheets and trading Penny Stocks is very easy to get into, it can be a paradise for scammers. There are already many people who have fallen victim to penny stock fraud and as an investor; you must be able to know the different warning signs when it comes to penny stock fraud. Some of the warning signs that you have to be on the lookout for are unauthorized transactions and mismarked trade confirmations. Even if your stockbroker is handling all the transactions, you should also be aware of everything that is happening.
At the end of every transaction, your broker will provide you with a trade confirmation that will be the evidence for the transaction made. In this trade confirmation, you will find basic information like how many shares were brought for how much, the ask/bid price at the time of the transaction and other background information.
If you see that there are wrong information inputted in the trade confirmation, call the attention of your broker and have it changed immediately. Also, if you see transactions being made in your account without your knowledge, notify your broker. It may be an honest mistake, but it also can be a potential penny stock fraud in the making.
The best thing that you can do to combat penny stock fraud is to be well-informed and be vigilant when it comes to approaching penny stock trading.
Related Tags: profits, penny stocks, pink sheets, otc stocks, smart cap stocks, stocks investment
Nir Dotan is a writer and promoter ofPenny Stocks services, andPenny Stocks Preferred source for the latest news and information on the best and brightest Small Cap Stocks.
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- Sbi Best Sip Plans 2010
SBI Mutual funds have introduced many mutual schemes. Each scheme has different limitations. SBI SIP - Icici Sip Plans 2010 - Best Sip Plans
ICICI Prudential offers many schemes. These fund schemes have SIP. What is SIP? SIP's expansion is S - Determining Where To Invest Money
There are several kinds of investments, also you will find numerous factors to find out where to inv - Retirement Plans A Necessity Of Life
A person works whole life to give a decent upbringing to his children and families. But while improv - Stock Market Timing Signals
Follow the PlanThis would seem a statement of common sense, but the fact of stock market timing sign - A Selection Of Financial And Investment Strategy Guidelines For Turning A Profit
Yet, we don't often have the money to leave work right at this moment. We need a constant salary to - Find Out The Profitable Way To Invest In Small Cap Stocks
Everyone wants to find a penny stocks list or other investment strategies that can turn your literal - Portfolio #4 - Watergate
IntroductionThe problem is not that the world is running out of water. No, the problem is that drink - Dulton Group: Information Content Of Dividends
Dulton Group helps you to analyze the information content of dividends, an important factor affectin - Coping With Fear In A Markets
The real fact is that all traders, investors as well as stock market investors, who feel afraid, occ
Most viewed articles in this category:
- Investor Stress: A New Approach
George Muzea is both an investor and a stock market advisor. In any given month, he will be paid $10 - Real Estate Investment Financing
1. Location: Your real estate investment's location is arguably the most important component of your - Canadian Oil Sands - Who Are the Major Players
The Canadian oil sands represent one of the most lucrative investment opportunities to oil and gas i - Why Bulk Preconstruction?
Bulk preconstruction is the latest trend in secure, high profit real estate investing. By buying wit - Investing - It Is Not As Scary As You Think
Many people want to have more money - OK everyone does. However, most people don't know how to go a - How Do I Know Which Programs Are Scams?
Although it is virtually impossible to tell if a HYIP is a scam until the moment when they stop payi - Currency Trading Success - 6 Tips to Increase your Profits
If you want to increase your profit potential and achieve currency trading success then the simple t - The Business Cycle
Investors who want to beat the market should be followers of the business cycle. The business cycle - Pros and Cons of Real Estate
Like any other profession, there are good and bad things about what are available. Each of the thin - The Fixer Upper
Real estate investing has become almost a national pastime. Millions are made every year on the buyi