Penny Stocks: the fool's gold
Penny Stocks for Dummies:
If you are reading this, it probably means you are interested in some quick and painless penny stock tips. Penny stocks for dummies, the book, offers a wide variety of those, but the simple fact that you are considering such a poor and risky investment means that you already are an expert for dumb things and as such, require no further advice!
If, however, you are willing to listen to some sound advice, here are a few major reasons for why penny stocks don't work...
Penny Stocks are dumb for the following reasons:
-Penny Stocks are a huge gamble! While this seems like an obvious one, it's not. Though all stocks are risky and could be considered a gamble, penny stocks are a gamble in a vegas casino sense. If you win, you win big, but in order to win you have to win against impossible odds.
-Penny stocks are unregulated. Unlike regular stocks which trade on reputable exchanges, penny stocks are too small and shady to be listed on NASDAQ and thus are traded either directly from the company or through pink sheets. Either way, these two methods are neither practical nor safe. Pink sheets and OTC boards lack regulation and the SEC has very little input or reach when it comes to checking up on pink sheet listings.
-Penny stocks lack information and history. Since penny stocks are small companies that are just starting out or are currently on the verge of bankruptcy, there is very little information available to the public.
-Penny stocks are full of scams. Due mainly to their unregulated trading policies and suspicious lack of financial history, penny stocks have become prone to all sorts of spam and high pressure sales related scams. The most popular one, is of course the good old, pump and dump scheme. This scheme involves hyping up (or pumping) a worthless stock until other investors fall for the scam and buy the stock and hyped up prices. After that, the fraudulent investors proceed to dump their worthless stocks on the rest of the investors....
