How to Rate Penny Stock Sites

Penny stocks are simple to manipulate. Keep your head about you to avoid being taken advantage of.

The task of evaluating penny stock websites is extraordinarily challenging. Penny stocks in general have a deserved reputation for being extraordinarily risky and vulnerable to manipulation by unethical stock promoters. In fact, the SEC requires all brokerage firms to provide a document to all investors outlining the risks of investing in this class of security before they are allowed to buy shares of penny stocks. Evaluating penny stock websites requires that you use common sense and independently verify all claims being made by the website.

Instructions

1. Review all claims made on the website for spurious, inaccurate, or emotionally manipulative content. Typically penny stock promoters will make claims without backing them up, such as "This stock is poised to explode by 1200 percent." No one can accurately predict the direction of a stock to that degree of accuracy. Those kinds of claims are a sign that the company is attempting to appeal to gamblers and others who are uninterested in whether or not the company that the website touts is fundamentally sound.

2. Look at websites of the companies being discussed on the penny stock website. If the company itself has no credible Web presence, it's a telltale sign that it might not be a solid investment opportunity. Public companies are required by securities law to release regular press releases about their activities. If the press releases appear to be misleading, outdated, or inaccurate, there is a good sign that the websites or newsletters promoting the companies are inaccurate or unethical.

3. Check independent financial website reviews through services like Investimonials (Resources 1). While these kinds of websites may not be entirely accurate, you can at least find out what some of the reviewers think. There are many traders who profit from penny stock scams, although the majority who get involved in "pump and dump" scams lose money. You may also go to trader forums to inquire about particular websites. Rely on your intuition and common sense by independently verifying claims made about websites and companies.

Tips & Warnings

• Never take claims made on penny stock websites as absolute truth without verifying them first. If claims are impossible to verify, it's a sign that it's not worthwhile to trade or invest based on that information.

References

• StraightStocks: How to Find Penny Stocks That are Scams
• SEC.gov: Penny Stock Rules
• JunkFax: Anatomy of Stock Fraud

Resources

• Investimonials
• SEC.gov: Important Information on Penny Stocks