An unwanted event when investing in penny stocks is how quickly you can lose money in a bad investment. Even though the rewards of penny stock investing are far greater than most investments you will find, the risks can be daunting.

If you are like me, you want high returns fast without losing money. I will show you two ways to avoid the high risk and get high returns, the slow way and the way I use (which I will mention at the bottom of the article).

Here is the long way, but one that works, to greatly reduce, the risks of penny stocks:

1. Beware Hot Stock Tips

You have most likely received a “hot tip” via spam email at some point or another. The promoter promised you fantastic guaranteed returns on your hot penny stocks investment. They word the email to make it a “once in a lifetime” opportunity. The best thing to do is delete the e-mail. Chances are you’re being scammed by a “boiler room” scam operation. These shady operators buy up worthless shares at fractions of a penny and then attempt to flip them for a few dollars per share.

2. Trading Penny Stocks in Unregulated Exchanges

These penny stocks may not meet the compliance and the reporting requirements of a regulated environment. Since these stocks trade over-the-counter, Pink Sheets are naturally avoided. Stocks sold over the phone or directly from the company are equally suspect.

3. Trading Activity Is Erratic

Investors who have already invested in shares with an erratic trading activity, will have to stick around with them as it would be difficult to find a buyer.

4. The Lack of Reporting by the Company

Financial statements are necessary in order to evaluate a company and when they are deliberately not issued, it is obvious that the company has something to conceal. The companies issuing penny stocks do not issue financial statements.

5. Hollow Company Hype

Such companies who persistently highlight their latest achievements involving the whole of media, have something fishy in them. They do not provide the details on how their revenue or profits were increased.

Even after your broker solicitated the trade, if your trade confirmation is marked ‘unsolicited’, it’s a cause of worry. It is unscrupulously done by the penny stock brokers in order to avoid the registration laws and apparently maintain a ‘fair, just and equitable’ standard. Any wrong statement regarding the investor’s net worth, income and account objectives are a warning signal.

Investors should also be cautious about blind pools and blank checks. He ought to know the company plans regarding what they would do with the proceeds and how they plan to handle the management and promoters. But all these details are just not available for the penny stock investor. Therefore, risk hangs paramount.

Now to the Fast Way and the Best.  I subscribe to a Newsletter that is the Best Selling Penny Stock Newsletter on the Internet.  It has a documented winning record and on average about twice a month I am presented with a stock with the reasons why they think it is about to explode.

Click Here to See For Yourself

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This entry was posted on Monday, September 1st, 2008 at 12:40 pm and is filed under investment, Main, make money online, newsletter, penny stocks, stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.