Alexander Green has this to share on penny stocks. His views are congruent with mine.
Long Shots: The vast majority of tiny, unprofitable companies are such ridiculous long shots, they don't even merit your attention. Most of these companies have little, if anything, in the way of profits, not to mention the first prerequisite: sales.
Wide Bid/Ask Spread: You could drive a cement mixer through the bid/ask spread on many penny stocks. For instance, if a stock is offered at 30 cents and bid at 24 cents, you're down 20% as soon as you get your trade confirmation. (And that's before commissions.
Low Liquidity... High Risk: Penny stocks are thinly traded and easily manipulated. You may buy a penny stock and see it zip higher. But then try getting out. It's pretty disheartening to know that you can drive down the price of your stock simply by selling a couple of thousand shares at market.
Often referred to as a "pump-and-dump" a penny stock scam is when the insiders talk the stock up on one hand while bailing out like there's no tomorrow on the other.
That's usually because despite the great story (and make no mistake, the stories are always fabulous) the company's genuine business prospects are usually nil. But penny stock promoters want you to trust them and believe in the hot tip.
I want you to know that I apologize for my childish behavior. mistranslation, not a deficit of character. I was wrong to speak with such contempt. I do not do it again.
ReplyDeleteBut you know what? You are unbelievably right.
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