First, never use anyone's share newsletters or stock recommendations. They can tell you anything and you have no way to tell if it is good or not. If you lose money it is your own fault, right? They win no matter what you do and they don’t care.

Before buying any stock, do your homework. The mistake most people make is thinking that penny stocks are different from other stocks. They are not. You still need to be as sure as you can that you are investing wisely. You are not in it to gamble, you are there to make money. It is much better to buy 10 shares of a good company than 100,000 in a dog with fleas.

It is true that many penny stocks, mostly those trading below $1.00 are shams, but not always. Here are some pointers that will help you tell the difference:

This one is cheap, quick and simple. Go to Google Finance and input a ticker that you are interested in. When the data comes up, you will see a column on the left. Near the bottom is an item called Financials. If it is not there do not invest in the company. If they don't have financials, they are no good.