Download - Beware of Penny Stocks
Several years ago we wrote about how to invest in penny stocks.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
The common rationale for investing in penny stocks is that they are cheap.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
It is the mistaken belief of naive investors that these stocks have nowhere to go but up.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
For the beginning investor with a small amount of capital penny stocks can seem attractive.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
They wonder how to invest in penny stocks.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Before looking at how to invest in penny stocks let’s see what we are talking about.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
These are stocks that typically sell for less than $5 a share ($1 by some definitions) and, thus, allow the investor to buy a block of shares for less than if buying 3M for $86.20 a share of Google for $595.47 a share.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Penny stocks are often companies that are starting up and have a net worth in the millions instead of billions.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Because few if any stock analysts follow penny stocks they can be sleepers with a large degree of hidden value.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
How to invest in stocks, in general, is to know the fundamentals of the stock.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
This can be difficult with penny stocks.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Thus penny stocks can be traps into which the unsuspecting investor might fall.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Beware of penny stocks. If you have unique insight into the company you may know something that stock analysts do not. This can be very profitable.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
If you do not have any special insight into the stock you may be in for a rude awakening when the stock that sold for pennies now is out of business.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
We are not the only ones to advise investors to beware of penny stocks.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Price per Share versus P/E Ratio
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
USA Today writes about penny stocks.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Beginning investors are often attracted to penny stocks thinking the low per-share price means they’re cheap.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
But this thinking is misguided. Keep in mind the per-share price by itself doesn’t tell you much about a stock.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
It’s the per-share price compared with the company’s profit, revenue or cash flow that tells you if the stock is actually cheap or not.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Some penny stocks could be the most overvalued stocks you can buy – if the company’s profits are evaporating, the company loses money or has poor prospects.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Penny stocks are also prime targets for scammers.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Their low per-share prices make them easy targets to be manipulated.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
They are also at risk of being delisted from the exchanges.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Most online brokers allow you to buy penny stocks, but most charge added surcharges.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Only 15 stocks in the Russell 3000 trade for less than $1 a share. Avoid those.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Share price compared to profit is the price to earnings ratio (P/E ratio).
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
A high P/E ratio indicates that the stock is expensive and a low P/E ratio indicates that it is cheap.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
In our recent article about the risk of higher interest rates we note that blue chip stocks are being bid up and more risky stocks, such as penny stocks, are being bid down as investors flee to quality.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Beware of penny stocks at a time when interest rates and thus the cost of doing business are going to go up and putting pressure on weak companies.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
Always remember that there is a reason why a stock sells for pennies and that reason may simply be that the stock shows very little promise of long term success.
http://profitableinvestingtips.com/penny-stocks/beware-of-penny-stocks
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