In case you haven’t noticed there is a plethora of penny stock picking services. Each and every one of them is vying for you attention and more importantly vying for a piece of your wallet. But the question that is at the forefront of everyone’s mind is whether or not these penny stock picking services are a worthwhile investment.

I think that it is difficult to group every penny stock picking service into the same category. There are penny stock newsletters that do a decent job and there are others that are out there to simply take your money. The question that most have is how do you tell the difference between those that offer good penny stock research and the others who are merely promoting penny stock scams? Well, that is a very good question. So let’s consider a few factors that may help you be a little bit more discerning.

I would group all of the penny stock newsletters and penny stock pickers into one of three groups. They are either bonafide stock pickers or paid pumpers or penny stock scams. Let me explain.

Some companies and individuals are paid to promote certain penny stocks. They receive a fee for peddling a particular stock to their email list or subscriber list. In other words, they have not done any research on their own and short of having been paid a fee they would never had made this recommendation. They are supposed to disclose the fact that they are paid pumpers. Normally you will find this in the small print at the bottom of their website (or some other inconspicuous place) or in small print at the bottom of a newsletter. If they are sending an email, I doubt that you will see that disclosure anywhere. If you see this type of disclosure then you will want to save your hard earned money. Do not give it to these “penny stock gurus.”

A second group of penny stock newsletters is nothing more than an outright scam. There are certain newsletters that step in ahead of you and buy shares in a particular company prior to advising their readers to purchase. If they have a decent size subscriber list, the stock will experience a surge on the day that they issue their buy alert. They will normally do this in thinly traded penny stocks so that the move is exaggerated. When a large number of buyers enter a stock that is thinly traded then it can experience large gains in one or two days. The problem is that you are buying at the height of the frenzy and the owner of the penny stock newsletter is selling what they had accumulated over the last number of days or weeks.

Now at some point the SEC will catch up with them since one of the subscribers is sure to catch on to this before too long but you can lose a lot of money in the meantime. The best way to pick out these people is to research some of their past penny stock picks. If they always trade in thinly traded stocks and following the spike in price (where the readers purchased) the stock returned to the value that it was trading at before then you are most likely looking at a newsletter who could be classified as a “pumper and dumper.” They are in it to make money at the expense of their subscribers.

I would also check the veracity of their trades. I have seen many a newsletter claim that they bought at a certain price on one day and sold at another price a few days later. However, when investigating whether this was possible I found that it would have been highly improbable. Too often they claim to have been buying at the low of the day and selling at the high of the day. I hate to say it but no one is that good. They should be able to show you real results of their trading. If they can’t do that or are unwilling to do that then keep your money in your pocket.

The third group of penny stock picking services is what I would classify as the real deal. They are obviously in it to make money but they do right by their clients and provide solid penny stock picks based on reason and fundamentals. This does not mean in any way that all of their picks will be successful, however, a good, legit penny stock newsletter can help you make money. Companies such as this might even be willing to share a few upcoming picks with you just to enable you to get a feel for their effectiveness.

I do not necessarily have any recommendations for those that are on the up and up. I make my own penny stock picks. I recently saw a company that claims to have great success in picking penny stocks. It is called the Penny Stock Psychic. It is sort of a hokey name but if he is truthful about his picks then he has been quite effective. I am a little surprised that the cost of the membership is only $97 for a lifetime. Normally penny stock picking services charge that for each month. However, I know nothing about them and have not purchased a membership. If you are interested then do your homework before buying so that you don’t have buyers remorse. If the guys picks are any good if should only take you one small trade to recoup your money. Investigate it closely before any purchase.

I guess the upshot of it is this. If you are looking for a penny stock newsletter then take your time and search carefully. Do your homework on each newsletter or service that you come across. Don’t take anyone at their word. Investigate each past pick. If you happen to know of someone who is happy with a service then that can go a long way to providing legitimacy. But make sure that you know them. Don’t trust every internet site that you run across. Many of them would pump a garbage product to you if it makes them a little money. That is why I made it clear that I don’t have a recommendation. Good luck in your search and choose wisely.