The stock market is not a child's play and, moreover if you, as an investor, look toward personal gains from stocks, then, you need to segregate between types of stocks available in the market as it shall be well worth your time. There are several good penny stocks available, which could quickly turn a small amount of money into a small fortune. First of all, you need to perform a good research from well known sources as it helps in investing "smartly". There are a few penny stocks which you should avoid buying. Some of them are as follows:
1) A tele-stock-seller: A tele-stock seller is basically a call centre executive (in most cases) who is paid a commission based on the number of deals he or she finalizes. It is definitely not in your personal gain, but in his. A sound company would ideally not resort to a tele-sale tactic to clinch a deal.
Tip - You must always use a stock news channel to know about worthy stocks instead of a tele-caller's advice.
2) The hot-tip stock: Rumors have a very low percentage of actual truth in them. If word there is a word about a possible stock going high in value then, there are chances that this hot-tip is just a rumor which has been started by a promoter or a non professional investor who wants to throw the gentry off-track. As a matter of fact, it is hard to predict which stock would appreciate or depreciate, only constant watch on stock movement can help one judge or perhaps faintly predict price movement, on the whole, it takes years of experience to even judge this part well.
Tip: You should make your decision on the basis of actual printed information on paper and not on rumors.
3) Guaranteed performance: The stock market is known to be volatile. Nothing is ever guaranteed within this market. Stocks can crash and stocks can also climb in value without any warning. Predictions on movement are possible but guaranteeing performance is almost impossible. If your gut tells you a company is worth investing in, proceed, but do not buy into someone else's assurance on performance because this "someone" would either be a broker who anyways stands to gain from your buy or could be a promoter himself. Base your decision after thinking about various other stocks and also watching the movement in the market.
Tip: Always remember that nothing is "guaranteed" in a stock market. This is what makes the industry a hotbed of financial eruptions.
4) Sinking ships: Just because a stock costs less, it doesn't mean that it is a good bargain; remember that this isn't a FMCG environment. There is no guarantee that a stock's value which has dropped will go high after a while. It's possible that it can go lower too, so, ideally, it isn't the best way to choose a stock.
Tip: A sinking ship would ideally drown and may not float back up.
5) Commission Free: If you want to buy stocks, commission free then there are chances that you are anyways being charged a hidden commission via higher bid prices or by buying on the actual bid price based on a broker's valuation.
6) Warrants & Rights: These fail to qualify as stocks and are actually derivatives, but these can be confused as stocks because they get listed on stock sites and are traded for pennies.
Tip: Keep attentive when buying stocks to make sure that they aren't actually disguised derivatives.
One should be careful, purchasing the above mentioned penny stocks as they may lead to great loss rather than any profit.
