Wednesday, January 8, 2014
Why I Always Recommend Investors Always Avoid Penny Stocks Or Low Single Stocks That Are In The Financial Services Sector'
I would like to make this clear. I am not a fan of financial services stocks. I have a real problem with these type of companies. All they do is move money around its really that simple. They do not create anything of value theirs no real product or service that they provide. Consumers need a bank or other financial company to provide checking accounts for paying their bills by check for example. Or they may need a mortgage to buy a home. The bank is just a middle man for the money changing hands between the buyer and seller. Banks make their profit by loaning money out at a higher rate than what they pay on their deposits. Businesses need a bank of other financial services company to provide a line of credit or they may need a bank to deposit funds in various types of accounts payroll accounts and so forth. Another reason that I dislike financial services stocks is this when a bank goes under the shareholders are instantly wiped out once the federal deposit insurance corporration takes over the bank the short name for this federal agency which is responsible for the orderly process of selling the banks assets paying off insured depositors and so forth is the FDIC. When this happens you will lose 100% of your investment. Financial services stocks have a terrible record a record number of banks failed back in the 1980's. What we witnessed in the panic of 2008 and 2009 when some of the countries largest financial institutions failed or were prevented from failing because the governemnts TARP program saved them. Their were many publicly traded rmortgage companies that went under that specialized in subprime mortgages. Financial stocks have one of the highest risk profiles of any class of stocks I would much rather invest my money in a company that makes a product or provides a neccessary service.
Some excellent Penny Stock Investing Resources
Penny Stock Investing Newsletter
Manhattan Calume Value Stock Hotline
Red Chip Companies