Take our advice and you’ll be able to avoid investing scams involving penny stocks

Penny stocks can attract investors with their low prices and promises of high returns when they pay off. Yet the odds against success are very high with these speculative stocks. And they can provide fertile ground for stock promotions and investing scams, as well. Penny stocks can be more easily manipulated than most stocks because of thin trading and price volatility.

There are a number of things all penny stocks have in common besides their low price. You need to know what they are to pick winners.

Bad penny stocks require the most intensive marketing and promotion

Penny stocks do sometimes pay off, but there are many pitfalls to avoid. You should be aware that many penny stocks are little more than very well executed marketing campaigns. Penny stock promoters will do anything in their power to get their penny stock noticed. These extensive marketing campaigns include emails, TV interviews, podcasts, newsletters and paid sponsorships.

There are also some so-called news sites that will sell sponsorships to penny stock promoters. These are great opportunities for penny stock promoters but bad for investors looking for an unbiased opinion on a stock.

What penny stock investing scams look like

Penny stocks can be more easily manipulated than most stocks that trade on exchanges because of their generally low trading levels and resulting price volatility. Combine this with a lack of regulatory oversight on some stock exchanges, and the fact that these companies are easy to launch, and you can appreciate why investment frauds are more common with penny stocks.

Canadian penny stocks can be riskier than other investments

Investors looking to add to the aggressive portion of their portfolios may turn to the higher-risk strategy of buying speculative Canadian penny stocks.

However, there are several potential risks when investors venture into penny stocks.

Buying low-quality Canadian penny stocks is one of those things that can appear to be successful before it goes badly wrong. Some get hooked on it, since low-quality stocks can be highly profitable over short periods. That’s because they are generally more volatile than high-quality stocks.

Investing scams: Canadian penny stock promoters sometimes aim to make companies appear bigger than they are

Penny stock promoters love to make deals (however tenuous) with major, household name companies. The link with a major gives them instant credibility, especially with investors who are willing to buy penny stocks.

When penny stock promoters get a deal with a major, they go to great lengths to make it seem bigger than it is.

In fact, when a penny stock shoots up on the news of big-company involvement, and the property/program/revolutionary software is still in the early stages of development, it’s often a good time to sell.

Other investing scams: We haven’t found any Canadian marijuana stocks worth the investment

Investors are now routinely asking about Canadian marijuana stocks.

So far, all we’ve seen are stock promotions and many investing scams.

We advise staying out of stock promotions of Canadian marijuana stocks businesses or anything else. They attract the wrong kind of people. Stock promotion is a take-the-money-and-run type of business. Most successful entrepreneurs value their reputations, and want to build a profitable, sustainable business that can pay off for investors. So they generally go into some other line of work, and stay out of stock promotion.

These days, it’s faster and easier than ever to launch a stock promotion, thanks to the Internet. One recent “penny pot” investing stock scam almost seems like an MBA-style case study on how to launch one of these frauds online. To avoid being taken in, it pays to read more, and to think before you invest.

Penny stock promotions: Investing scams?

Some penny stock promoters are just doing their jobs, maybe even reporting the facts as they see them, and some are out to make money at any cost. The goal is to develop the innate ability to see a penny stock promotion for what it is and when to know a company has actual growth potential.

Are you considering buying penny stocks? Have you bought some in the past? Have they been winners or losers? Share your experience with us in the comments.