If you’re a long-time Wall Street denizen, you may pride yourself on spotting a bad or toxic stock and giving it the boot from your memory bank’s span even before your broker clears his throat to give it a casual mention. However, not every potential investor shares your good sense – and even you are prone to the odd (and costly) mistake. It’s all part of the game, but there certainly are a few telltale signs that you can make use of in order to identify a toxic stock before it has the chance to do damage to your financial health.
Does The CEO Sing A Song That Sounds Too Good To Be True?
A lot depends on the image that the company manages to paint for itself in the media as well as in the market. Is the CEO of the company spinning a particularly fancy yarn that seems to cause your financial instincts to revolt? Are they simply telling a tale that is too good to be true? If the line they are laying down concerning their stock and its potential for growth and development seems to be based on fantasy, it very likely is.
Very Few Stocks On The Market Are Ever Truly Unique
For example, does the CEO spin a picture of unparalleled growth with no bumps in the road? Does the company expect to operate in a vacuum, with no challenges from serious competitors who are attempting to corner the very same share of the market? There are very few goods and services on the international market that are truly unique, so if the stock you are considering cannot make this claim in truth, it’s very likely that the other claims they are making are also suspect.
Do The Backers Of The Stock Have A Creditable Track Record?
If the people who are backing the stock are using their track record of success to push a particular stock, it’s an excellent idea for you to do everything in your power to research and ascertain the truth of their claims before you sign on the dotted line. There are some companies, such as Fisher Investments, who make it a point to check the identification and track record of CEOs who offer stocks on the market. When you are considering buying a stock, it’s an excellent idea to follow Fisher and these other companies in emulating President Reagan’s famous dictum, “Trust, but verify.”
Does The CEO Of The Company Claim To Also Be An Investor?
Sometimes, in order to sweeten the deal for inexperienced investors, the CEO of a company will make a public claim that they, too, have invested in the stock. Depending on what they actually mean when they make this claim, it could be a cue for you to avoid this stock like the plague. For example, if what they mean when they claim to have invested in the stock is that they have picked up on stock options, as opposed to actual stock ownership, this is a clear deception that you should treat with the contempt that it deserves.
These are only a few of the many warning signs that you can pick up on in order to avoid buying a potentially toxic stock. It’s an excellent idea to seek out an experienced and trustworthy adviser who can help you steer clear of similar scams and deceptions in the market.
Dana Davis
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Stunning article, company head investors must go through this blog and beginners should be read this article.
Awesome post ! Very useful for the beginners of stock market. You have done an appreciable job by sharing it. Thanks!
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Very informative and I have many questions to ask about stocks and marketing.From last few years, I am working as agent but still no proper way to judge the market business.But above contents are very informative and helpful.Thanks!
I have been a victim of this toxic stocks and lost more than 1000 dollars of my hard earned money. Beware guys.
Thanks for sharing such a valuable information. This is very helpful and great source of inspiration for the beginners in stock market.
Great article Gail! This helps me identify a toxic stock and become more careful in handling and investing my financial resources.
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Hi George,
I’m glad you liked it. I hesitated to publish it as I don’t typically write about investing on this site.
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Definitely, if it’s the CEO, at some point they will be able to invest with their capital.
Thankful to you for your informative Article.It’s very good awareness post about Investors.Your articles has been a source of inspiration for beginners like me. It is easy to understand, short and very simple. More power to you and your future en devours.
by raminfotech
Definitely, if it’s the CEO, at some point they will be able to invest with their capital.
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Hi Gail,
I’m agree with your points, as a stock investor everybody should follow these points. Thanks Gail keep it up.
It’s very good awareness post about Investors. I was laughing while reading the line “Sometimes, in order to sweeten the deal for inexperienced investors,
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Thankful to you for your informative Article. My suggestion for the all new stock investors, to read the article carefully and take knowledge and use it in your business.
Your articles has been a source of inspiration for beginners like me. It is easy to understand, short and very simple. More power to you and your future en devours.
It’s very good awareness post about Investors. I was laughing while reading the line “Sometimes, in order to sweeten the deal for inexperienced investors, the CEO of a company will make a public claim that they, too, have invested in the stock.” Because i had an experience like this as an inexperienced investor.
If i have read this before 2 year, i wouldn’t have lost my 200$. Which was my dad’savings for me.
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