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I am extremely excited to announce my new e-book, SOLID STOCK SELECTION is now available !! Click here to find out more.
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Penny Stocks 7/23/06 Unsolicited investment faxes would have you believe that penny stocks seem to be part of the investment picture, and could really boost your returns. Is there anyone out there who has not received faxes of this nature (or e-mails, for that matter)? There is a breakthrough that has not yet become public information and someone "accidently" sent it to your e-mail address or fax number. I know this sort of thing is rampant in many offices and in many homes. Friends of mine were telling me they were woke up every night around two in the morning as their home office fax machine received the latest 'hot stock tip.' The first time they were really excited and thought that they were 'inside' on something big. Luckily they didn't act on it, and talked to me, originally to share they information, but also to get my opinion on the stock. When I still worked in corporate America, there were always a couple of faxes next to the office fax machine. Always a cheap vacation or a 'great investment opportunity.' In the case of my friends, it was a penny stock. Wow, the opportunity to own a hundred thousand shares of stock. Playing like the 'big dogs.' The writer of the fax was telling his good friend Dave, in confidence, that he overheard his boss on the phone telling his broker to convert his entire account to the stock, and that it was going to double in the next week. Now I will stop right here to define 'Penny Stocks', in case anyone is unfamiliar with the term. In general a stock is referred to as a penny stock if the price is under one dollar. These stocks are generally a very risky investment and most brokerage firms will not even handle them. They are unpredictable and since they are not listed on the standard exchanges, they can be for a totally fly-by-night sort of enterprise. I have talked about share price in the past, and I will once again say that the price per share is relatively unimportant, the total value of your investment is what counts. If you have $1000 in $10 stock or $1 stock and the price increase by 5% you have earned $50. (At least on paper, prior to any associated fees, etc.) Now, I will revise that price per share statement here and now. Although you can make money on penny stocks, it is highly speculative, and not generally recommended. If you feel you must take a chance on one of these schemes, make sure it is money you can truly afford to lose. I have yet to see a penny stock that survives even the most cursory due diligence. I have followed a few penny stocks (mostly curiosity when the core business was related to another investment) and some have gone up substantially in price. Most of those quickly fade away to the original price or even less. This sort of thing is known as a "pump and dump." Publicity of any sort can impact stock price, even of penny stocks. Someone buys at very low prices (sometimes fractions of a penny) and sells after the 'pump' moves the price to a penny or two. The gain from the publicity then falls away, as does the money the naive investor hoped to gain. thanks for your time and as always, good investing to all. Rob
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Want a scholarship into the Millionaire Mind Intensive worth $2590? http://www.secretsofthemillionairemind.com The columns, articles, message board posts and/or any other features provided on Wealth Training Source are provided for personal finance and investment information and are not to be construed as investment advice. Under no circumstances does the information in this content represent a recommendation to buy, sell or hold any security. The views and opinions expressed in an article or column are the author’s own and there is no implied endorsement by Robert Britt of any advice or trading strategy copyright Robert E. Britt 2006 |
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