Posted on 08 August 2012.
Many investors have heard stories about the hot penny stocks that can result in huge returns. Most of the investors who take a shot on the OTC market, however, turn up empty handed. Understanding what makes a penny stock hot is the first step to being able to single out the good investments from the bad. Although penny stocks have earned a bad reputation, they can still be great investments for those who know how to handle them.
Unbelievably, most of the hot penny stocks have a few things in common. First, they belong to companies that are responsibly managed and have a sound corporate structure. Second, they represent products that are either useful or appealing to the general public. A product must earn its place on the market if anyone is going to buy it. Third, the hottest penny stocks start out low and end up high. In order to make money on the OTC market, or any market, you must buy low and sell high. In order to know that a stock will rise, however, you will have to do your research.
Knowing what all of the hot penny stocks have in common is only the first step. Neither the Pink Sheets nor the OTCBB list the soundness of a company’s corporate structure or rate a product’s market appeal. You will have to do the research yourself if you want to guarantee that you make informed investment decisions. While it can be incredibly difficult to research a new company’s management, it may be easier than you think to rate a product’s market appeal. Consider what the company sells and decide whether you would pay for it. Scan through some discussion forums online to see what other people think. Once you have found a product in which you believe, you can rest assured that you have found one of the hot penny stocks.
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