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Investment Tips

 

 

Penny Stocks Truths

A 14 Cent Stock at the Heart of China's Industrial Operations

Penny stocks is another field promising investors the chance to make extraordinary profits.  Many are lured into the mine field of penny stocks with no extensive background on how to avoid the traps. 

 

Ten Cent Up = 100 Percent Gain

The exciting truth about investing in penny stocks is that a very small move up in price could mean a big percentage gain.  For example, one cent increase in bid price for ten cent penny stock is already a 10 percent increase. 

This means a ten cent increase will give you an 100 percent profit.

What can be more exciting?  Well... but the opposite is also true!

On a cent move down, you will have lost 10 percent of your investment.  And just a 5 cent decrease in price will wipe out half of your investment.

This is not an investment where you can use your stock market investing basics.  The intraday price swings are too wide to use most investment safety techniques. 

Moreover, many brokerage firms have trouble placing stop loss orders for small bid increments.

So you already know about being "Pumped And Dumped" ... how about this version

Most penny stocks investors are victims of the pump and dump semi-scam. 

Many penny stocks have been accused of using this strategy to transfer wealth from their investors into their company insiders.

To do this, company executives hires a publicity firm to tout (pump) their penny stock with some highly exaggerated facts.  When the unsuspecting penny stocks investors buy up these shares, the company insiders then release (dump) their shares with a much higher price than before.

At the end, the penny stocks investors are the ones holding up the bag with no one to sell their shares to. 

We all know when there is no buyer in the market, those penny stocks just plummet back to the previous price or even lower.

 

A 14 Cent Stock at the Heart of China's Industrial Operations

Sinopec Shanghai Petrochemical has risen over 90% since our recommendation.

Hopefully, you already know that we do not like our clients to tread the field of penny stocks unless he or she already has extensive background (and intends to invest full-time). 

But then why was Sinopec Shanghai Petrochemical, a company traded on NYSE, one of our recommendation.

First, Sinopec Shanghai Petrochemical is not a micro-cap stock.  Micro-cap stocks is just a more professional sounding name for penny stocks. 

It takes the gambling sounding tone out. 

Since most penny stock investors are really gambling with their portfolio, we will stick with the name penny stocks. 

Sinopec Shanghai Petrochemical has nearly $2.5 billion in annual revenues and hundreds of millions in profits.  It is not something most penny stocks can state about themselves. 

Most penny stocks have no profits which make them very highly speculative investments (which equates to very high chance of losing your money).