Wednesday, December 26, 2007

Buying Penny Stocks Without All The Work

By George Best

Buying penny stocks is potentially very profitable, but penny stock investing is also filled with risks. Thorough research and evaluation of stocks can greatly reduce the risk, but this process is tedious and requires a considerable investment of time and effort.

There is a new computer "bot" that has been created that analyzes penny stocks thorough in-depth mathematical analysis and by doing so dramatically decreases the risks and increases the profits from buying penny stocks, while greatly simplifying the work of choosing what stocks to buy and when. Of course, such a system does not come cheaply, but there is an opportunity for even the smallest of investors to reap the benefits of it.

Penny stocks have considerable advantages to small investors as compared to other stock investments. The low stock price allows those with small amounts of money to invest to buy shares of multiple stocks and diversify their portfolios much more than they could with higher value stocks. Because even small dollar and cent changes in price can translate to large percentage changes in the price of penny stocks, good profits can be had with relatively low amounts of money invested.

As an example, let's say that you have $1000 you want to invest and you buy 10 shares of a stock selling at $100. If that stock goes up by $1 per share, you'll have made $10. Now let's look at a penny stock that you invest that same $1000 on 1000 shares selling initially for $1 each. If that stock increases by $1, you'll have made $1000 - usually in the same or less time than it takes to make the $10 on the high-value stock!

Unfortunately, just as penny stock investing can provide very high profits very quickly, buying penny stocks can result in big losses quickly too. Besides the normal risks that occur just from normal market forces, penny stock investing is especially risky due to the relatively high rate of fraudulent practices by sellers of the stock. Corporations that issue penny stock are not required to submit financial statements to the SEC, so it can be hard to find good information that you can rely on when trying to evaluate the stock.

Penny stock is often sold using hard-sell and shady or outright fraudulent marketing ploys. As unsuspecting investors buy up over-hyped stocks and the stock price rises, the insiders wait until the price reaches its ceiling and then quickly sell off their shares. With the sell-off, the price per share plummets and the investor is left holding worthless stock that never had anything more going for it than a good sales pitch. Investments with potentially high returns over a short period of time do tend to be risky, but in penny stocks the relatively large amounts of fraud increase the risk way beyond what can be attributed to normal market forces.

To overcome the risks, buying penny stocks has traditionally required a large investment of time to research stocks to avoid the scams and predict a relatively good rate of return. A careful penny stock investor could spend quite a bit of time evaluating a single stock. This effort would hopefully pay off in the long-run, but the time required in doing this often made penny stock investing out of the question for part time investors.

A couple of computer geeks who also had an in-depth understanding of penny stock investing have recently developed "Marl", which is a computerized bot that can evaluate hundreds of penny stocks in less time than it would take a human to evaluate just one. Unlike human stock-pickers, Marl is 100% cold and calculating - there's no emotion to cloud his judgement. Although even Marl doesn't have a perfect track record, he's a lot better than any human, and Marl can dramatically decrease the risks involved with penny stocks.

Marl has allowed some big investors to make many millions of dollars, and as such, Marl doesn't come cheaply. At $28,000 to purchase Marl, he's out of the question for most investors, but there is a way for investors with even the smallest of budgets to use Marl. Marl's human inventors put out a very affordable newsletter with Marl's top penny stock pick each week. In the case of those investors new to penny stocks, this could be preferable initially to owning Marl, as it limits their investment choices to just one stock per week as opposed to having to select from many options. This makes for easy stock investing for even the newest of "newbies" to penny stock investing.

Although the inventors of Marl have indicated that they will be limiting their subscriber list to the newsletter and may stop selling new subscriptions in the near future, hopefully they will have compassion for the small investors who need all the help they can get and continue to allow new subscribers long-term. In the meantime, small investors now have an option to dramatically assist them in buying penny stocks.

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