Tips on Penny Stock Investing by An Authority

Penny Stock Investing Tips
By Ezilon.com Articles
Mar 29, 2006, 23:18

..However, it should be remembered that the price being sub-$5 or sub-$1 does not necessarily imply a weak, near-bankrupt company. In the aftermath of the great bear market of 2000, a number of legitimate, fully reporting companies found their shares valued in the pennies. They were technically penny stocks. But the major exchanges typically allowed such companies short-term exemptions to stay listed as long as they meet SEC reporting guidelines. [That is just what (STBV) accomplished.]

Hence, trading in such penny stocks may not always drive you towards fraudulent companies and potential losses. This makes the case even more complicated, and stresses the need for deep research before taking entry or exit decisions.

There is yet another high risk pitfall coming from the important difference in how penny stocks are traded. Major exchanges such as the NYSE and Nasdaq do not list penny stocks; instead, they are consigned to secondary markets to the Pink Sheets, for example.

The liquidity measure of how easy it is to buy and sell a stock is much lower in secondary markets than they are in the majors. As a result of the low per-share price, it is not unusual for individuals to hold hundreds of thousands of shares. Often the liquidity disappears soon and it becomes impossible to exit such large positions without severely driving down the share price further.

Hence try not to be attracted by the high liquidity of low stocks in secondary markets. Look before you leap is the word for investing in penny stocks.

The best tip is: never invest in anything you don’t understand. If you don’t understand the penny stock at deeper layers, let it pass.

GAAP, Inc. is a shareholder of  Strategic Global Investment, Inc. owner of the WaZuu Website, for your information.