Second, low liquidity levels provide opportunities for some traders to manipulate stock prices, which is done in many different ways - the easiest is to buy large amounts of stock, hype it up and then sell it after other investors find it attractive also known as pump and dump. Buying These Stocks Two common fallacies pertaining to penny stocks are that many of today's stocks were once penny stocks and that there is a positive correlation between the number of stocks a person owns and his or her returns. Oft genug werden Sie sich auf Anhieb nicht gleich sicher sein, ob Sie sofort Pennystocks kaufen und einsteigen sollen, oft genug sind Sie sich sicher, sofort einzusteigen aber Ihre Limit-Order wird nicht bedient und die Pennystocks-Aktie rennt ohne Sie davon.
How We Find the Diamonds in the Rough
If a company has changed its name and, especially, business focus multiple times. Check for massive reverse stock splits like 1-for, or 1-for, James Rivera January 24, make money. Jim January 26, Sign me up. Derek January 27, interesting. Michael Foster January 29, Help. Cindy Higgins February 2, I hope this money morning will help the averagae Canadian in investing in penny stocks!
Amelia Batalis February 3, I would like to buy. Can only start with Symcha Brodt February 25, I don't not now. Terri February 28, Would like help with stock picks. How do I start? Giovanni Mejia March 28, I need help finding and picking stocks. I'm new to investing in the stock market. Geoff April 2, I'm interested. You may choose from these hot topics to start receiving our money-making recommendations in real time.
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Making Money with Options. Get in on the Ground Floor: Cryptocurrency News and Profits. Small Cap Stocks Alerts. Money Chart of the Week. D R Barton Jr. By submitting your email address you will receive a free subscription to Money Morning and receive Money Morning Profit Alerts. For micro-cap stocks, information is much more difficult to find. Companies listed on the pink sheets are not required to file with the SEC and are thus not as publicly scrutinized or regulated as the stocks represented on the NYSE and the Nasdaq exchanges; furthermore, much of the information available about micro-cap stocks is typically not from a credible source.
Sometimes, this is why the stock is on one of these exchanges. Once a company can no longer maintain its position on one of the major exchanges, the company moves one of these smaller exchanges.
Minimum standards act as a safety cushion for some investors and as a benchmark for some companies. Lack of History Many of the companies considered to be micro-cap stocks are either newly formed or approaching bankruptcy. These companies will generally have a poor track record or none at all. As you can imagine, the lack of histories of companies only magnifies the difficulty in picking the right stock.
Liquidity When stocks don't have much liquidity, two problems arise: If there is a low level of liquidity, it may be hard to find a buyer for a particular stock, and you may be required to lower your price until it is considered attractive by another buyer. Second, low liquidity levels provide opportunities for some traders to manipulate stock prices, which is done in many different ways - the easiest is to buy large amounts of stock, hype it up and then sell it after other investors find it attractive also known as pump and dump.
The Problem for Investors Penny stocks have been a thorn in the side of the SEC for some time because micro-cap stocks' lack of available information and poor liquidity make these groups of stocks an easy target for fraudsters. There are many different ways these people will try to part you from your money, but here are two of the most common:. You may receive spam e-mail trying to persuade you to purchase particular stock. All e-mails, postings and recommendations of that kind should be taken with a grain of salt.
Look to see if the issuers of the recommendations are being paid for their services as this is a giveaway of a bad investment and make sure that any press releases aren't given falsely by people looking to influence the price of a stock.
These companies will typically sell the stock at a discount to offshore brokers who, in turn, sell them back to U. By cold calling a list of potential investors investors with enough money to buy a particular stock and providing attractive information, these dishonest brokers will use high-pressure "boiler room" sales tactics to persuade investors to purchase stock.
Buying These Stocks Two common fallacies pertaining to penny stocks are that many of today's stocks were once penny stocks and that there is a positive correlation between the number of stocks a person owns and his or her returns.
Investors who have fallen into the trap of the first fallacy believe Wal-Mart, Microsoft and many other large companies were once penny stocks that have appreciated to high dollar values.
Many investors make this mistake because they are looking at the "adjusted stock price", which takes into account all stock splits.