Penny Stock market is full of manipulations, frauds and scams, so you have to learn how to avoid being scammed by fraudulent penny stock dealers. Some suggestions are;
- There is difference between promotion and research. You can view more penny stock research tools on here. Promoters recruit newsletter writers to make reports on their stocks; many of them make appealing case for investing in unworthy stocks. You as penny stock investor should know difference between stock promotion and valid equity research. One must read the disclosures given at the end of such reports
- Success of the company depends on its management, same is the case with penny stock companies, and you need to find out company management track record like failures and success.
- Penny stocks generally don’t provide detailed financial information, but it is necessary for you to check financial statements of the company. Analyze the complete balance sheet to find out is company has any outstanding debt or liabilities as well as to know the cash flow and liquidity.
- Focus on quality of disclosure, if company provides better disclosure, it will help you to judge companies position. Avoid investing in company with, low or no information. For example OTC market groups categorize its shares into three-tier market place OTCQX(the top one) OTCQB(Middle One) and OTC pink depending upon transparency of company’s operations
- Investor should assess the company’s business plan whether the given plan is achievable for particular company or not. Companies should have appropriate asset base to execute its plan.
Penny stocks are highly speculative investment options, and one should approach this type of stock with caution. Investor should follow proper trading and investment strategy. You can avoid scams by following these suggestions given above. Investing smartly and logically can increase the chances of success even in risky trading.