Don’t Be Penny Foolish!

what-are-penny-stocks

When I first started investing, I fell into a trap that many new investors fall into.  That trap is putting money into penny stocks.

Penny stocks trade at pennies for a reason.  They are usually very small, unproven companies with questionable business practices as well as management.

I know it’s hard to resist the temptation of buying a developmental biotech, trading at 10 cents per share, that may have the cure for cancer.  Hell, you could buy 100,000 shares and cash out at $100 when the company gets bought out!

However, the likelihood of that happening is slim to none.

Don’t get me wrong…there are a few companies that traded below $2.00 that became great investments.  Most of these didn’t start off as penny stocks, though.  They fell there because of a market crash.

It’s okay to take a flier on a young company that may have promise, meaning it has good management and real technology behind it.  But try to stay above $1.00.  And don’t make your entire portfolio consist of companies at or close to $1.00!

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

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