HOT PENNY STOCK PICKS

There are two major fallacies that pertain to hot penny stock picks and investors thinking penny trading is a good idea. The two fallacies are that there is a positive correlation between someone’s returns and the number of stocks someone owns.

The first incorrect idea is that many investors believe that companies like Microsoft started out as one of the hot penny stock picks that appreciated to a high dollar value. This mistake is made often by investors because they look at the adjusted stock price, which considers all of the times a stock has split. However, they fail to look at the starting market price of $28. There are many emails that lead people to believe that Microsoft and Wal-Mart stared out as hot penny stock picks. These are just spam messages advertising penny stocks and somewhere within the message is the guaranteed stock that is being hyped up that it will be as successful as the two companies also. Brokers should not make mistakes like this and they should be able to read the numbers properly or they should not be offering advice. Many people consider themselves to be brokers because they have invested in several different types of stock. It is important to be able to read the documentation properly about the stocks and you will know when they truly are hot penny stock picks.

Another funny idea some brokers have is that it is better to own more stock than less. Fore example, a stock is $.10 and you buy 10,000 shares with your $1000, rather than purchasing 100 shares at $10. Many investors believe that more is better. However it just isn’t the case because when the 10,000 shares drop their value to $.05, which can happen within minutes, then you have lost half of the value of everything. The probability of you losing your investment is high.

Hot penny stock picks are hard to find. However, they do exist out there. Make sure you know what you are reading when you are looking at the statistics of a stock and the stock splits and be aware that more is not always better.