The Problem With Trading Penny Stocks – Investor Beware
Most people these days are always on the look out to earn a lot of money, quick. This is one of the major reasons why a lot of online offers are promising a lot of ‘Get Rich Quick’ formulas and hype which very simply do not work, and as a result, they quickly and quietly lose the money invested. The “Make Easy Money” mentality has also reached the stock market trading arena in droves. This has left multitudes of people investing unwisely on penny stocks that may be just too risky to begin with.
So What Are Penny Stocks?
Are Investing In Penny Stocks Risky?
Beware The Lack of Background Information
Since there is very little corporate information available on the majority of these penny stock companies, there is a very good possibility that you may be making a bad investment. Thus, you may end up losing more money than you planed on earning.
So Why Is There Such Limited Information
But without this valuable information, it would be difficult for the investor to make the proper objective trading decision, and this often leads to unwise uneducated guesses.
How Risky Is Buying Penny Stocks
The usual scenario that occurs is that a company may buy quantities of a certain penny stock and then distribute emails telling potential investors that a certain stock is doing well in the market. A lot of people in the “Get Rich Quick” mentality will often respond to this by investing in these stocks, causing the price to shoot up. The price escalates due to supply, demand and hype. After the price spikes up, the original promoter then sells his share at the inflated price for a huge quick profit before the price dramatically drops back down, resulting in the investors to lose a lot of money.
Although there is potential for growth in valid penny stock offerings, the risks involved are a lot greater than buying conventional proven, “Blue Chip” stocks.
Most often, if you are not familiar with the “Penny Stock” issuers business background, or you employ the “Get Rich Quick Mentality” to hopefully profit on your stock investment portfolio, there is a chance you may be a victim of one of these questionable offerings. Buyer Beware.