"Red hot" is an over used and exaggerated expression predominantly employed by US market tipsters, usually promoting a tip sheet or market news service. "Red hot penny stocks" - perhaps the most common example - is used by tipsters to indicate they have identified cheap stocks which they believe will very shortly increase dramatically in value. This is often accompanied by the notion that the market has missed something and there is a chance of beating the big market players. These sort of sales pitches identifying apparently undervalued stocks are often aimed at small investors with limited finances. The low cost of the shares and the promise of high returns can seem very attractive.
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US Investor Relations
In the US there is also a trend for some investor relations (IR) companies to use similar language. IR companies are paid to promote specific company stocks, their aim is to help sell shares and raise the value of stock. Sometimes it can be difficult to tell the difference between a tip and a promotion. Though IR adverts promoting stocks in the US have to carry a disclaimer.
"Red hot penny stocks" - perhaps the most common example - is used by tipsters to indicate they have identified cheap stocks which they believe will very shortly increase dramatically in value.
Some professionals recommend that you devote no more than 10% of your individual stock holdings to penny stocks. It's also important to understand your risk tolerance. Generally speaking, the higher your risk tolerance, the more equipped you are to take on the risk that can come with investing in penny stocks.
In the past, penny stocks were considered any stocks that traded for less than one dollar per share. The U.S. Securities and Exchange Commission (SEC) has modified the definition to include all shares trading below five dollars.
Some professionals recommend that you devote no more than 10% of your individual stock holdings to penny stocks. It's also important to understand your risk tolerance. Generally speaking, the higher your risk tolerance, the more equipped you are to take on the risk that can come with investing in penny stocks.
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