| THE EXPENSIVE STOCKS- THAT YOU BROUGHT | | | | bigger companies have not much room to grow. |
| CHEAP | | | | Right? We all want to get rich from the stock market, |
| The meaning of cheap stock, that is, stocks that they | | | | otherwise we would not trade? True? Read the Fine |
| are trading under 60 cents or below, are always | | | | Print- Be careful of 'the cheap stock' |
| enticing - because you put down a small amount of | | | | Traders and investors will often flock to internet chat |
| money for a potentially lucrative return. It also looks | | | | rooms and talk up a cheap stock, saying they are |
| good because with your investment you are getting a | | | | going to find large amount resource, or they are doing |
| lot more shares, or contracts for you amount invested. | | | | a big deal with a big company. Why does this happen |
| However, for many investors, this scenario is just a | | | | because people buy it and then want someone else to |
| pipe dream to buy that stock at 10 cents and see it go | | | | continue to buy it. |
| to $10. Does happen but not very often and it can be | | | | This is called "pumping and dumping" and it happens all |
| very costly. Sometimes they are cheap for a great | | | | the time. So make sure you are careful. As if this was |
| reason, they are NO GOOD | | | | true what is being said in the chat rooms, it would be |
| So what are the downfalls to cheap stocks? | | | | inside trading. Illegal so make sure you do you own |
| How can you identify if they are cheap These | | | | homework. |
| cheaper stocks can also be categorized by their | | | | A stock that maybe trades only 5,000 shares a day is |
| market capitalisation (that is, the total number of shares | | | | a good example of this type of scam and highly illegal. |
| multiplied by the price per share). Which is the total | | | | So do not fall into the trap. Otherwise you will lose |
| value of the company If a company's market cap is | | | | your money. By pumping up the stock it creates the |
| less than $100 million, the company is considered a | | | | price to move higher for no good reason. This stock |
| fairly small stock, or a "small cap stock". | | | | will soon be a DUD Trade. This Stock used to trade at |
| So is bigger better, or are small Fish sweeter, Will they | | | | $5 now its 50 cents. So that's cheap? Wrong |
| grow? Historically, small cap stocks have | | | | Another thing to avoid is a stock that has dropped |
| outperformed large cap stocks in terms of returns. | | | | significantly in price. Just because a stock looks cheap |
| However this is not always the case and you have to | | | | doesn't meant it's going to return to glory and you'll |
| remember the saying risk versus return. This isn't | | | | make yourself a big profit. The reason they fall is |
| because a lot of cheap, small companies are better | | | | because something fundamental may have changed, |
| investments than large companies, but because almost | | | | they could have lost most of their revenue by losing a |
| all big companies were small when they first sold | | | | contract, or could be sued there are a host of reasons |
| stock. Everything normally starts out small. Microsoft | | | | for this stock to fall. |
| started in a garage, and now they are one of the | | | | You have to ask yourself why the stock fell in the first |
| biggest company in the world. Most large companies | | | | place? Those odds aren't good that these stocks will |
| are through growing or are just fighting for market | | | | rebound. The odds aren't in your favour. Following the |
| share. | | | | trend, remember trend is your friend. |
| Money-hungry investors turn to small stocks to buy, | | | | BUT REMEMBER THEY CAN REBOUND.. |
| because these stocks are cheap and it looks like the | | | | |