We generally turn to search engines to collect information on our future investment plans. We read articles on how to invest, where to invest, and blogs about what companies are up to and how they are performing. This is great because it conveniently dissects and collects public information. The problem with finding pink sheet penny stocks to buy however is there is really no regulation on this type of information. No sole source that validates the company financial records. In fact, the only body that oversees the numbers (the IRS) has no obligation to validate reports that get issues (or leaked) to the public.
Financial websites that are seeking information to analyze on these small companies often turn to “inside information” in order to have something to write about. This inside information is almost always false and unhelpful because if it was valuable why would the person give it away? The most common types of employees to give information away against the companies will are the disgruntled employee. Not exactly my first choice for reliable information.
The next reason using “inside information” to make a decision on a penny stock is not reliable is because it is technically illegal to invest on inside information. We all assume that the big traders do it, but in reality you’re not supposed to. Just ask Martha Stewart; it’s not that hard to prove you had inside information that the general populace couldn’t have known. As a result, you can face big fines and even jail time.
So if you can’t trust information you find online, how do you decide which companies are worth investing in? I prefer to use my own ears and eyes. Phone them up and ask questions. If it’s local, ask for a tour of the company. These companies aren’t that large and are happy with any amount of investor interest. If they don’t want you in the doors there is probably nothing worth putting your money into anyway. Another idea is to use a reputable penny stock broker who can help filter out the noise and short list you a few good penny stocks with high growth potential. Whatever you decide on however, always be sure to diversity your portfolio and never put more than 5% of your funds into one stock.
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