Be Wary of Penny Stock Newsletters

Penny stocks are extremely speculative and those who invest in them take on a huge risk. Penny stocks have made quite a few people rich, but they have also made a whole lot of people poor because of constant penny stock picks that didn't pan out. Penny stocks often trade over the counter or on the pink sheets, which means they are not regulated in any way, which is the single biggest hurdle you face when investing in penny stocks.

If you are like most investors you have seen penny stock picks touted somewhere recently. Penny stock picks are a dime a dozen it seems, and they are just about everywhere you could possibly imagine. On the Internet penny stock pickers come out in droves constantly. There are tons of penny stock message boards on the net which allow free space for people to talk up their latest penny stock pick and try to convince others to get on board with their picks.

Though other methods of touting penny stocks are common, probably the oldest and most trusted by investors is the typical penny stock newsletter. Let me first say that I understand there are quite a few penny stock newsletters that are legitimate and try their best to make investors money, but I must address the majority that are printed for another purpose.

The simple fact is that many penny stock newsletter that claim to have insider picks or great penny stock tips are printed for one sole reason, to allow the company printing them to sell at a higher price. By sending out a newsletter and getting thousands of readers to pay attention they are able to create a more liquid market for their penny stock and they will likely get some positive price action if anyone believes their sales pitch. Sadly, by the time many investors have gotten the newsletter and invest in the penny stock the company who printed the newsletter has likely sold the stock for a healthy profit. Since there are no regulations over this market and there is little liquidity in many names, price manipulation is extremely common. Any stock that has been manipulated professionally is one that you'll want to stay away from. The bottom line is that these penny stock newsletters that just happen to arrive in your mailbox or even your email inbox are often more harmful to you than they are helpful. Penny stocks are extremely difficult to deal in to start with, and penny stock newsletters that are designed to help the newsletter writer's profit are rigged to make the little guy lose.

Penny stock picks should all be taken with a grain of salt, since penny stocks do not provide any financial information or data to backup their news flashes. Penny stock newsletters that arrive unsolicited should be discarded immediately, before they cost you a significant amount of money!