Avoid "Penny Stocks"
By Saghir Aslam
Irvine, CA

 

(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)

These stocks have a very low price and very high risk.  Investors to avoid shares under $10.

Risk increases as the price goes lower.  So too does the "spread" in buying or selling the issue. Examples: Piezo 1/16 by 3/16; 2/3 of your dollars are lost the moment you buy!.

Unless the investor wishes to own/manage the company, it is wisest to avoid these issues.  Since we have all heard of examples like Valley Forge Scientific from 1 to 11 in a year, and we are all tempted by these issues from time to time (every day if we listen to Money Radio), we should follow some simple rules if we do invest in this area:

1. Do not invest in only one issue; use 4 or 5 in equal dollar amounts.

2. When you have a double, always sell half the position and purchase another issue.

3. Only buy issues that have available research.

4. Be patient.  These issues are not Procter & Gamble, GE or IBM and thus they take more time.

5. Speak with the shareholder relations people at each company and visit them if you can.  

(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale .)

 

 

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Editor: Akhtar M. Faruqui
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