Avoid Penny Stocks At All Costs, Warns Investorplace

youngInvestorsB.png Deciding What Stocks to Buy? Avoid Penny Stocks

Of course, it’s not like regulators are blind to these schemes. The Financial Industry Regulatory Authority issued a scam warning concerning some marijuana stocks , writing: The con artists behind marijuana stock scams may try to entice investors with optimistic and potentially false and misleading information that in turn creates unwarranted demand for shares of small, thinly traded companies that often have little or no history of financial success.

The scammers behind these pump and dump scams can then sell off their shares, leaving investors with worthless stock. Its good to be aware of such warnings, because for every cockroach you see, there are dozens more hiding in the walls. So how do you protect yourself from scams, such as those penetrating the ranks of some marijuana stocks? The simplest way is to never trade microcaps or penny stocks. I have written extensively on the topic (see this post about microcaps, this post about low volume and this post about penny stock risks ), and many in financial media agree with me.

Stick with stocks that trade more than 100,000 shares daily, have a market cap of more than $500 million and trade on major exchanges. There are a few exceptions to this rule, but its better to be safe than sorry and penny stocks are anything but safe. Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investors Guide to Finding Great Stocks.

To read more, visit http://investorplace.com/2013/09/penny-stocks-to-buy-marijuana-stocks/

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