“”Penny” Stock Investment Traps

So-called penny stocks can’t be bought or sold for pennies any more. They can also be priced for a few dollars a share.

By definition, they are any shares of small companies whose values are often doubtful, at best.

Their managements or promoters issue large numbers of shares, whose prices are low, but with values that are often minimal, if any.

Yet, those who ought to know better buy them. They think something priced low has to be a bargain. That's the best way to get fleeced.

Does it always make any difference when buying higher priced stocks? Not if you still cannot determine value. And most analysts on Wall Street cannot truly do this from outside the companies, looking in. Analysts are often guessing at what goes on in the companies whose stocks they evaluate.

It’s the reason why I always suggest investment in low-cost, indexed mutual funds or exchange traded funds (ETFs). (See the Earl J. Weinreb NewsHole® comments and @BusinessNewHole tweets.)