All about investment

Peter Leeds

Have you ever wondered why a penny stock falls sharply in price right after it achieves a major


There's an expression in the stock market that says, "buy the rumor, sell the fact." The idea is simple. When there's an outstanding rumor about an upcoming event for a company, investors buy in, thus pushing penny stock share prices higher. Once the event itself is actually realized, the share price loses that upward buying pressure, and the penny stock drops in value.

For example, ABC Inc. is likely to get FDA approval for their new drug. The upcoming ruling is widely expected, and many investors buy in, speculating that the announcement will send the shares skyward. This starts pushing the penny stocks' price up.

Once the actually FDA approval is officially granted, the shares don't spike much higher since the speculators had already run the share price up so much. Now that the announcement is out, many of those same speculators start cashing out, putting a great deal of selling pressure on the stock.

The following events are some examples of what might drive buying interest:
• impending patent award
• expected strong financial results
• new major customer or contract win that is widely anticipated
• upcoming release of a new version of their technology
• anticipated FDA clearance

Any such widely anticipated event would gradually push share prices higher. The penny stock would gradually increase, higher and higher, until the underlying event finally came to pass. Then speculative buying vaporizes, sellers come out of the woodwork, and shares start their descent.

For this effect to actually occur, the rumor or event needs to be:
• widely known
• growing in probability
• noteworthy (potential for a major impact)
• nearing the date it's expected to occur

"Buy the rumor, sell the fact," plays out again and again on the markets. It's certainly not the exception, but rather the rule. Keeping this in mind will help you identify penny stocks that may trend upward, allowing you to ride the shares up for profits. Just make sure to escape your position before they come crashing back down to earth, and more realistic valuations. In other words, buy the rumor, sell the fact.

By:Terry Mitchell

Here's an illustration of why attempting to the time the stock market is so perilous.
Let's say you are tired of all the recent losses and decide to exit the market when the DOW is at 7500, with plans to get back in when you think it is safe again. Then it goes up to 8000 and you start to believe that the worst is over, so you get back in at that point.

However, it turns out to be a "sucker's rally" and the DOW goes down to 7000. You panic and get out again. Then it goes up to 8500 and you think the market is surely out of the woods this time, so you get back in.

But you are wrong and ride the DOW back down to 7000 before getting out again. Then it shoots back up to 8500 and you swear you will not be fooled again, so you stay on the sidelines this time. Finally, being extra cautious, you let it go all the way up to 10,000 before finally being convinced that the worst is indeed over.
You are right – this time it is. But look at all the gains you missed out on and unnecessary losses you took by trying to time the market instead of staying the course.

Therefore, no matter how low it might go, I do not plan to remove my retirement funds from the market until I reach an age at which keeping them in would no longer be prudent, i.e., I wouldn't have enough time left prior to retirement to recoup any potential losses. And at that point, I would have no intention of re-investing in the market.


Terry Mitchell is a software engineer, freelance writer, amateur political analyst, and blogger from Virginia, USA. He posts a least one article a day to his blog - http://commenterry.blogs.com - on subjects such as current events, politics, technology, society and culture, religion, health and well-being, self improvement, personal finance, trivia, and sports.

You can now have any article and blog post he writes – in advance, if you would like – for use in your book, newspaper, magazine, ezine, newsletter, website, or whatever!! This includes the thousands of articles and blog posts he's previously written. Contact him via this website or his blog for details.

By David L Wells

Investing these days has become quite tricky, even treacherous!

There are bad investments all around us on a daily basis. The government seems to have a pretty good handle on bad investments as of late. They are spending $3.6 trillion dollars in the near future on programs we can only hope will help. Oh, by the way, that comes to about $25,573 dollars for each of our 139 million taxpayers. That's ok. Just put it on my bill, or better yet put it on my kids' bill.

Citigroup, for those who do not know, is the nation's largest banking institution. Chances are if you have a credit card or a mortgage, Citigroup is playing a part. Citigroup has been touted as the world's worst investment.

Former Treasury Secretary, Hank Paulson, made a terrible investment on behalf John Q Public. He purchased 7.8% stake in Citigroup for $25 billion dollars. Then he added guarantee's against 90% of future losses on $301 billion dollars in assets. Subsequently, we (taxpayer) injected another $20 billion dollars. So, for paying for about 100% of the market value for Citi, we got less than 1/10th of a company that was worth 1/5th of our investment.

Pretty good deal, eh?

That $45 billion dollar stake has a market value of just over ONE billion today. And, it's about to get worse. The Treasury Department has agreed to convert $25 billion of its preferred stock investment into common stock at Citi. This means the taxpayer's stake will rise to near 40% of Citigroup.

It's just another example of why these insolvent banks should be nationalized or FDIC Mandated, pre-packaged chapter 11, government funded reorganization.

David L. Wells
http://www.apg-llc.us
http://www.debt-negotiation-apg.com

Article Source: http://EzineArticles.com/?expert=David_L_Wells