You see the ads all the time (there's probably one on the right side of this page thanks to the magic of Google ads). 600% penny stock gains! Triple your money in one day! Before you go ahead and waste your hard earned dollars on such nonsense, check out the top five reasons why you shouldn't gamble your hard earned dollars away.
5: It's Like Riding a Roller Coaster.
Penny stocks can go up really fast; that's what makes them so attractive to people trying to make a quick buck. But they can also go down really fast, and all your hard earned gains can evaporate in minutes.
4. A Lot of Times They're Illiquid
Liquidity refers to how easily you can sell an asset. Because penny stocks don't trade on regular stock exchanges, they're not as easy to buy or sell as regular investments. This means that at best it's going to be difficult for you to get a good price on them, and at worst you won't be able to sell when the price goes down quickly. Entire hedge funds have collapsed because they got into investments that they couldn't sell and their assets quickly became worthless. Take a lesson from them and leave penny stocks alone.
3. You Get What You Pay For
If somebody told you that you could buy a painting for $1000 today and it would be worth $3000 tomorrow, would you buy it? No, then why would you do the same thing when investing in a business? A stock like Google trades for $600 a share because it's the dominant player in its field and everybody knows how it makes its money. A stock with random initials like ZXYH trades for five cents a share because somebody heard from a friend of a friend that it's going to someday maybe build jet packs that let people fly to the moon.
2. The People Who Are Hyping Them To You are Paid to Do So
That guy who's promising you a 600% return on your investment is most likely being paid by the penny stock owners to hype their company. Always read the fine print on any web site, and sometimes you'll catch them saying how they were paid. Even 50 Cent was recently caught hyping his own stock on twitter. Sometimes though, they won't even mention it. Just remember, the people running ads are there to make money for themselves, not for you.
1. It's a Fraudster's Paradise
There's a lot of fraud on regular old Wall Street where the SEC can see everything that's going on. Penny stocks are basically sold in the back alley of finance, a place where the cops rarely go. The classic pump and dump scam works like this: penny stock owners hype their stock through press releases and over the internet; sometimes they even get celebrities like 50 Cent and Shaq to endorse their product. Then, when a bunch of marks start buying and the stock reaches a high enough price they sell all their shares, make a profit, and laugh all the way to the bank while the people who fell for the scam watch as the value of their shares dwindles back to zero. Don't be one of those people.
No comments:
Post a Comment