Chapter 11: Beware the Wolves of Wall Street
1. There
are some things we need to consider when dealing with low-priced stocks. Movies
such as The Wolf of Wall Street
illustrate some of the unethical and downright criminal behavior that occurs in
low-priced stock issues.
2. The
best way to avoid getting caught up in this type of fraud is to avoid the
come-ons and advertisements for companies you have never heard of, or are
recommended by someone you have also never heard of.
3. Many
firms charge much higher commission rates for lower-priced issues so you need
to be aware what your broker is charging you to invest.
4. Other
issues to aware include:
a. High
interest costs for margin borrowing on lower-priced stocks
b. Potential
costs due to high spreads in some low-priced issues
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