Avoid Penny Stocks No Matter What

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

These thieves prey on investors in the following ways: False promises:Fluffy marketing about your product is one thing, but faking contracts or alluding to pending deals that never will transpire are another. Typically, these companies have products that will revolutionize an industry or have growth potential that makes them the next Apple ( AAPL ). Take everything you read with a fistful of salt in the market in general especially when it comes to penny stocks and microcaps.

Celebrity spokesmen: Penny stocks aren’t above paying someone to tout their company. Daniel Rudy Ruettiger of Notre Dame walk-on fame was convicted of fraud for his antics in a tiny sports drink company, creatively called Rudy Nutrition. Rapper 50 Cent was paid to talk up a penny stock on Twitter . Clearly, this is a big warning sign. Pump-and Dumpers:The previous two penny stock scams feed into this third: unscrupulous investors who try to inflate a microcaps price so they can abandon ship at the top and make a fortune while others ride it down to oblivion.

This is most easily achieved in microcaps with thin volume, since its easy to move the market with a stock that trades only a few thousand shares a day. Of course, its 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.

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

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