| Add to Favorites | Set as Homepage | Contact Us

Penny Stock Risks

The risk of investing in penny stocks is you can quickly lose all your money. The rewards in buying good penny stocks could be great but penny stock buying is filled with many risks. To avoid getting scammed by a bad penny stock investment, here are some warning signs to look out for:

1. Beware Of The Hot Stock Tip: Have you ever received a hot stock tip by phone or email? The promoter promised you fantastic guaranteed returns on your hot penny stocks investment. It’s a can’ miss investment opportunity of a lifetime. The best thing to do is hang up the phone or delete the e-mail. Chances are you’re being scammed by a boiler room operation. These unscrupulous operators scoop up worthless shares at fractions of a penny and then attempt to sell them for a few dollars per share.

2. Penny Stock Trades In Unregulated Exchange: Penny stocks that trade in an unregulated environment does not have to meet compliance and reporting requirements. Companies in these situations tend to be of lesser quality. Stocks that trade in the OTC and especially the Pink Sheet are to be avoided. Also to be avoided are stocks that are sold over the phone or sold directly from the company.

3. Erratic Trading Activity:
If you purchased a penny stock with erratic trading activity, it could be very difficult to sell the shares. You could be stuck with the shares for a long time since it’s very hard to find a buyer.

4. Lack Of Reporting By Company: When you invest in a company, you want to know what you’re buying. To give you an idea, you need their financial statements in order to properly evaluate the company. If no financial statements are issued, the company might have something to hide.

5. Company Hype: Be careful of companies that constantly issue statements that highlights the latest developments but provides no details on how it helps increase revenue or profits.

6. Other Bad Penny Stock Clues: Here are other bad penny stock clues to look for. They include bankrupt company shares that are still trading, have five letter ticker symbols and the share price trade at fractions of a penny.

Copyright © 1999-2003. PennyStocksMagazine.com Inc., LLC All Rights Reserved.