Many people are looking for that one big score in life. It’s the investment that seemingly for pennies will propel you into an overnight millionaire. The fact is, for every person who bets big on a risky investment and wins, there are many more who lose big. Following is a list of some of the riskier investments you should avoid.
1) Penny Stocks
Every couple of years or so the penny stock craze comes back in full force as someone writes a book or starts a blog about how they made millions in penny stocks, often touting they did it on their last fifty bucks—and for a small price they’ll generously share their secret.
I’m not saying penny stocks are a scam, however, many of these penny stock “millionaires” are make their money from selling “how to” books rather than penny stocks. Logically, without a detailed evaluation, the theory behind penny stocks seems to make sense. You have a stock less than five dollars which appear to be affordable. If you buy enough of the stock, any significant growth will net you a quick return. This is especially true when it comes to stocks under a dollar. For example, if you buy 200 shares of a $.50 stock, you spend $100. When that stock gets up to a marginal price of $5, you now have $1000 worth of that stock. It’s that easy right?
The catch is that penny stocks are low for a reason. This could be because of financial problems, bankruptcy, a bad product or a bunch of other reasons. Your chances of failure with penny stocks is much more likely than your chance of success, or even breaking even.
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