Action Alerts Plus will increase your investing success and transform your portfolio from mediocre to exciting. It often makes me 20% on every investment I make as long as I am patient. To learn more about it, click here. Tim is the author of elementary-finance.com, a financial blog providing beginning investment and finance advice to those who have a desire to learn the basics of investing and finance.
I had to get you to read this for your own good. I’m sorry to say that I don’t have the next hot penny stock pick but we need to have a talk about penny stocks and why you need to stay away from them. The stats are clear: Much like a slot machine, a few will strike it big but most might as well throw their money in the fireplace and light it up. You are more likely to lose your money. Bottom line!
First, let’s expose the big reason that people are attracted to the penny stock picks: They LOOK cheap. The problem with that theory is that they are not. Here’s an example: In high school I owned, at the time, a 10 year old car that barely ran. It was loud, rusted, dirty, and just a sorry looking piece of automobile. If I were to sell it, I may have got $500 out of it. My dad had a brand new Mercedes. The seats were even heated! This car was pure luxury. Most people didn’t make enough money in a year to buy this car.
What if my car and my dad’s car were sitting next to eachother, one selling for $500 and one selling for $40,000, assuming that you had enough money to buy either one, would you pick my $500 car simply because it’s cheaper? Of course you wouldn’t. Price alone doesn’t tell the whole story, does it?
For those people looking for the next best penny stock pick, that’s exactly what they do. They look at the fact that it barely costs anything and thing they are getting a bargain. What they are really getting, in most cases, is a stock that is loud, rusted, dirty, and just a sorry looking stock. It’s probably not going to do much other than go down in value. The reason it is cheap is the same reason my car was cheap. You get what you pay for.
Get away from looking at penny stocks. Let me give you another way to invest that has been my secret for a couple of years. Consider subscribing to a service like Action Alerts Plus where an expert like best selling author and CNBC commentator Jim Cramer is doing your research for you and all you have to do is buy and sell when he tells you to execute the trade. My secret is that I don’t have enough time to do all of my research so I let Action Alert Plus do it for me. This research is fact based and while opinion is offered, it is always heavy on fact so you have the tools to make your picks.
The hot penny stock pick really isn’t all that hot. It’s just cheap and cheap doesn’t make it undervalued. It only makes it cheap. The average investor doesn’t know what to look for to find the diamond in the rough in the world of penny stocks. Go with established companies that will make you money.
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