The Single Biggest Risk for Penny Stock Traders
By far, the biggest danger to penny stock investors is free stock picks. They come by phone, through e-mail spam, and even by fax. In many cases, a carefully crafted and fostered 'rumor mill' alerts you to a penny stock through a friend who knows a friend of a guy...
Never buy stocks you heard about through an unsolicited e-mail or phone call...
Never buy picks from a FREE newsletter...
In most cases, the penny stock company is paying people to promote their stock. They mislead you as to the prospects and potential of the company. If they were so good, why would they need to pay for investor awareness?
Dangerous sources of free stock picks include free newsletters, the rumor mill, e-mail spam, chat rooms, promotional web sites, and fax services. In each case, the publisher either has a vested interest in the shares, or is getting paid by the company to produce propaganda.
Generally speaking, the more you pay for a newsletter, the more likely you will get quality picks. The better services are able to charge a premium, because they attract clients through renewals and word of mouth referrals. As well, more expensive services generally put more into research and follow-up.
Did You Know?
There are a few things you can do to make sure you get involved with a good service for penny stock picks.
1. Make sure they have a phone number. (And a real one, not just a number that calls to nowhere!)
2. Make sure they offer a free trial. All the best services do, and all the worst ones don't.
3. Ask if they've had any media coverage.
By following these three indicators, you can weed out all the poor services and migrate towards the better ones.
