Buying penny stocks on "hot tips" can be a source of trouble. Investors receive tips from friends, relatives, business associates, and even financial professionals. The tip itself is not the problem. There are instances when tips do pan out and the stock goes up. The problem with hot tips is that most often by the time you get it the whole world has had time to react to the same information you were given.
Often times information originates from an original source that passes the tip down to a few selected individuals who pass it down their friends who pass to on again until the full cycle is repeated. The issue with hot tips is that you never know how far down you are in the information chain. If you are the 500th person to receive the tip, chances are that the stock has already been bought up and the price of the stock reflects the information. If the tip turns out to be true, there will be selling from the investors who bought the stock before you. By the time you buy it people might be getting ready to sell their stock.
The other problem with buying a stock based on a tip is that you are deviating from sound investment strategy. You are not buying the stock based on your due diligence and research and your money is at the mercy of a tip that may be wrong. You can make the right investments and find the best penny stocks based on your research without having to rely on other people's advice.
And lastly, be careful where the hot tip comes from. Inside information from company insiders is illegal and you don't want to get caught up into any SEC investigation.
About StockProfessors.com
StockProfessors.com is a website that profiles stocks of interest. We are not licensed brokers or financial consultants. Please be advised that the information contained may or may not be complete and is solely for informational purposes only. This is not to be construed as an offer to sell, hold or the solicitation of an offer to buy. Investors are encouraged to seek opinions by their registered brokers or financial advisors after extensive due diligence is performed.
For additional information: info
No comments:
Post a Comment