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| | | | | Dysfunctions of Penny Stocks by Andy Rodic | | | People lose a lot of money because of market crash. Although a lot is out of investors’ control, there are still lessons that can be learned when you are experience a market downturn.
Difficulty in obtaining Information on penny stocks
It is a true fact that it is not so easy to get proper information on existing stock market and corporation’s worth. Due to lack of knowledge about the company’s value people suffer many time. Price and volume data possibly will not be directly available to the public and may only be made available to you by the stock brokerage you’re dealing with. On average, pink sheets for penny stocks are only made accessible to brokerage firms.
Deception and uncertainty
This business is exposed to maltreatment, deception and uncertain sales practices as revealed in their history, and fraught with brokers who use high pressure sales techniques and cold calling.
Penny Stocks are those, which sell for under $5 per share on the exchange and are small company stocks. They are easy to purchase, but they can be hard to sell. They are easily manipulated because they are so thinly traded.
These stocks are hard to unload
Once you have bought the share, then your work is to sell it. For this you’ll need a broker, who may not agree with your decision regarding sell. Besides that brokers may be less than loyal of your wishes to sell your stock, and convince you to keep hanging on or trading these supposed “investments”.
Lack of History
Several companies measured as micro cap stocks are either newly formed or approaching bankruptcy. These companies will generally have poor track records or none at all. As a result, this lack of historical information makes it difficult to determine a stock's potential. An oft-quoted statistic shows that at least 70 percent (!) of penny stock investors lose their lose money, not counting the risks of fraud or abuse.
A highly chancy trading
If you one way or other make money from penny stocks, you may analyze this stroke of fortune entirely to your skill or careful analysis or the due diligence you poured into making your investment decision. It may simply be due to pure luck. These stocks are extremely hit or miss, just like at the slot machines.
Brokers may want to push penny stocks upon customers because they can charge more for such a stock. Be watchful of the charges a brokerage can impose on you for trading such stocks.
No Minimum Standards
Stocks on the OTCBB and pink sheets do not have to realize minimum standard requirements to remain on the exchange. Sometimes, this is the reason that 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 to one of these smaller exchanges. Whereas the OTCBB does require companies to file timely documents with the SEC, the pink sheets have no such requirement. Minimum standards act as a safety cushion for some investors and as a benchmark for some companies. | | | | Article Source : Article-treasure.com | | Publication date : 05-18-2010 | | | | Article by Andy Rodic | | | | For more details visit us at Penny Stocks http://www.pennyinvest.com/ | | | | Keywords : penny stocks, penny invest, penny stock, penny finance | | | | |
