When Buying Penny Stocks Is Not A Good Idea.
Many people want to trade in the stock market but they don’t have a lot of cash to do so. They talk to other people like themselves who are doing it. They are told that the best way to start is to buy penny stocks. That can’t be any further from the truth. Yes they can make big profits, but they can also lose a lot of their hard earned money playing in the stock market that way.
When you want to start buying stocks I suggest you look at ETF’s (Exchanged Traded Fund) and Mutual Funds. There are costs to each of them. You need to do your due diligence in looking for the right one. If your are starting out with less than $50,000, ETF’s and Mutual Funds are the way to go.
Buying penny stocks is what people who are uneducated in the stock market do. Don’t get me wrong, many people become very rich trading penny stocks. You hear it all the time, but what you don’t hear is that many more lose money playing it this way.
There are great companies that are on the rise in their industry, but not many. For every ten companies that are started, nine out those ten fail. Out of the ones that make it far enough to be traded on the OTCBB (over-the-counter bulletin board), at least 30% never make it past their initial public offering price.
You need to do research on the companies that you want to invest in. Learn to read financial statements, balance sheets and listen to conference calls on their earnings reports. Typically you need to do 5-8 hours of research for each company you are looking to invest in. After you buy into a company you will need to do at least one hour each week on each company. Do what I like to refer to as doing you due diligence, will end up saving you a lot of headaches later on.
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