For several weeks now the stock markets have been in a very good shape right around the globe which must be a very soothing feeling especially for those that are still licking their wounds having to cope with losses.
But there’s a flip side to this positive global atmosphere. And that side is pretty dark especially for newbies. What I mean is that more than ever people are being bombarded with investment recommendations that resemble gambling more than anything else! These stock recommendations have absolutely nothing to do with a serious and thoughtful investment.
Not only several renowned newsletters are trying to draw investors into buying stocks that will allegedly double and tipple within days, but also spam emails are infesting the inboxes of many email accounts. I get hundreds of these emails every week that promise profits that are from another galaxy and beyond our imagination.
These newsletters and email spams recommend stocks that most of us have never even heard of.and in many cases we don’t even know how to pronounce the company’s name.
It makes my stomach turn when I read the recommendations of these “carnival barkers” because I know that, unfortunately, they will find common ground with a lot of beginners.
Attracted by the possibility (no matter how minute) of fast and huge profits, they will even charge at stocks that only cost a few cents – so called penny stocks – believing that one can’t lose much with these cheap stocks. WRONG!!! That’s a fallacy!
If a 10 cent stock drops to 1 cent it’s still a 90% loss no matter what! And that can happen easily! It sometimes goes faster than one expects because more often than not some dubious organisation is manipulating these kind of stocks. They buy them dirt cheap and then create a hype hoping and expecting that many investors will buy these allegedly “highly profitable” stocks not wanting to miss the boat.
And there are enough buyers that will fall for these tricks. This will then cause the stock price to go up and up, and as more people see this stock rise and shine even more will buy in fear of missing their big and fat chance, making the stock go up even further.
OK. Now this obviously sound good. That’s what we’re looking for. A rising stock. But before you know it, these shady organisations then sell these stocks as fast as possible cashing in the big bucks. This sell-off will cause the stock to drop significantly and before you catch wind of it your stock is basically worthless and your money is gone.
Very few OTC stocks are successful in making the jump from this market to the NASDAQ, NYSE or any other major exchange due to their INABILITY to meet the listing requirements of the major exchanges.
These kind of securities are very risky because there’s no controlling body or organisation like the SEC which oversees the securities industry and promotes full disclosure in order to protect the investing public against malpractices. That’s why you should be very wary of OTC stocks because they are either penny stocks or hold bad credit records.
I will never understand what makes people invest thousands of bucks in Siberian uranium mines, Chinese energy stocks or even an Australian internet casino. Yes! You read correctly! You’ll be surprised what investments people come with.
And the same people will spend weeks and months paging through brochures and magazines when it comes to buying a new car or the latest plasma TV set. They’ll make comparisons, they’ll ask friends and relatives and go through all kinds of troubles just to get the real deal.