Free Penny Stocks – Scam or Reality?
Are free penny stocks a scam or a reality? The answer depends on where the free stock advice comes from. Most brokers are prohibited by law from starting a discussion on stocks that sell for less than $1 per share, although if you initiate the discussion the broker can offer investment advice for these stocks. Usually the free penny stock picks offered come with some type of hook. You will usually have to fill out personal information or make a purchase to access the free investment advice concerning penny stocks. Sometimes these picks are more than just random choices, the penny stock market is full of scams and schemes that do not always have the best interest of the investor in mind. Sometimes the offer for free advice about penny stocks is the front for a scam.
Many free penny stocks are a cover for a common scam called a “pump and dump”. The owner of the shares of penny stocks will create hype about the stock and start rumors, and get the stock included on a free list of the hottest new penny stocks so investors become interested. Once investors start buying the stock then the price jacks up significantly. The original owners of the shares sell at a greatly inflated price, and then when the true facts about the stock come out the price starts falling and buyers for the stock can not be found. This is a common scheme that frequently starts with a free offer and ends up with investors facing heavy losses.
Few free penny stocks end up being quality investments, and most of the financial advisers who offer these picks are not interested in long term quality and stability. Many experts say that you should never pay for stock tips in this market either because few legitimate investment experts offer these tips. It is better to find, research, and evaluate the stocks yourself. This gives you control over your investment decisions and lets you compare and evaluate the factors that you feel are important. Doing your own research and preparation will help you avoid many of the penny stock scams. This does not mean that there are no legitimate lists that can be accessed for free, only that most of these offers carry a high degree of risk and little oversight.
Most free penny stocks are a scam, and this is a fact that many investors find out the hard way. In the best case scenario you simply start receiving numerous offers and emails because the free offer ended up with your marketing information being sold or given away to others. A few of the free lists may even include one or two undervalued penny stocks but this is not common. If you are looking for penny stocks on the Internet and you come across these free lists you can use them as a starting point for your stock research, especially if no sign up is required. The free offers of stock picks should never be followed blindly though, thorough research should be done on any stock that you invest in.