a stock holder guide to steering clear of small-capitalization fraud
Like any other business opportunity, penny stock investment requires finding out as much as you can about the product being offered and weighing its advantages and disadvantages. If you receive a phone call or email that urges you to buy a hot stock pick of the day, you have a choice: Either be careful, even skeptical, or accept the offer blithely.
Penny stock offers are many and varied and all of them tempting. They can flood your inbox with “once-in-a-lifetime” offers. These email messages are often well-written and designed, with persuasive words and convincing testimonials from upwardly-mobile-looking personages. Phrases such as “hot penny stocks,” “best penny stocks,” “top penny stock picks” the list goes on and ever on are quite often used. If you don’t know much about stock trading, there’s a higher-than-average probability that you’ll plump for the deal and pray to strike it rich. If, on the other hand, you’ve learned from your own or others’ experience, you’ll know deep in your gut that this just might be another fraudulent offering.
In the words of Warren Buffet: Don’t invest in anything you don’t know about. If you don’t know anything about penny stocks, then don’t start. Learn about it first and seek guidance from the experts before diving into anything so risky like penny stocks. To know if the messages about penny stocks are scams, here are some tell tale signs it is a scam.
Improbably high returns or “100% guaranteed” success rates are definitely terms to avoid. How else can you be convinced, unless they use such aggressive, confident-sounding words? If an email or website claims that a particular penny stock is the hottest deal around, beware. If you read a line or argument that absolutely, positively states their method is a tested, proven technique or strategy, beware. Because, in the end, that’s all it is a strategy. Seemingly foolproof guarantees like these can get you into hot water fast.
Next, penny stock scams tell you that their offer is for a limited time only and that you are getting a steal by investing now only and that the prices right now are a bargain. While it is true the prices could be a bargain, it will take an intensive research to do that. Such claims need to be verified and unless they can prove it, then you have to remain skeptical. Plus the stock market is always there. There is no such thing as a limited duration offer. You can avail stocks any time you want by having an account with your broker.
More often than not, these shady stock sellers will regale you and attempt to strike awe with glittering success stories of big companies that they’ll claim started with their very own stock picks. If you happen to come across such claims of how some of today’s Fortune 500 companies started out with penny stock shares don’t fall for it. This approach has often been used, and is in fact overused.
The important thing to do is to not be gullible. Always be skeptical and do due diligence by checking their SEC records. Make sure they are duly licensed and their information can be checked for legitimacy. They have to have a good reputation and a long track history before you can even think of investing your hard earned money with them.
Never be pressured to make an investment decision. Always give time to study the offer before making a sound decision. Success is not instant, especially with stock investments. You have to learn about stocks, and about trading. Long term is often the best strategy in stock investment. Just look at Warren Buffet.
The contributor of this essay has came across a corporate finance expert named Josh Yudell. I believe Josh Yudell to be widely considered an expert in the fields of investor relations, SEC compliance, corporate finance and capital structure.
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