I can remember when the word penny stock was not such a
taboo word. It seems like the advent of the internet has really given penny
stocks a bad rap. It also seems so difficult to find the best penny stocks when
there is a ton of competing information and promotions.
An honest perspective of penny stocks would include the words research and
analysis, which simply means that penny stocks can be a great investment if
done with care and education. I suppose this principal applies to anything
right?
So why all the bad press out there about penny stocks? Well, there are a lot of
people who have carelessly jumped into the stock market and lost a lot of
money. As you can imagine these people are not very happy with the results. Its
human nature to hate consequences whether deserved or not. Penny stocks have
more frequently than other stocks burned up life savings of those who thought
they had it all figured out.
So penny stocks in general have received a lot of bad press because they
attract more people with unrealistic and uneducated expectation. Yet how is
this possible when so many have made riches in the penny stock arena? Its
because, believe it or not, even penny stocks are not get rich quick schemes.
You cant think that just because a stock is worth only pennies that it will
automatically make you rich over night or even in a week.
The pros know that you must diversify. The first mistake is to put all your
money into penny stocks. It would also be a mistake to ignore penny stocks
altogether. The pros also know it takes work to research a stock before just
jumping in. Its tempting to just find a stock that any ole Joe recommends and
throw down some money. People with these kind of investment habits usually are
the ones to get burned the most. Unfortunately they are also the ones that
create most of the bad press since negative news sells better than positive.
No doubt the companies have a responsibility to the investors to be trustworthy
and reputable. On the other hand the investor also has a responsibility to be
studious and careful with their own money.
All and all penny stocks get too much bad press and are presented as more of a
risk than they really are for the smart investor. Investors that know nothing
about investing should completely stay away from penny stocks initially. These
stocks are for the seasoned investors who know what they are doing.
