What Do You Think About Penny Stocks?

[ZERisTHE1]

I would like to get more involved in stocks. A buddy of mine told me he makes a good living off of penny stocks. This made me start watching a couple.

What I want to know is, is this a good way for another income?

If so, What are some I should watch?
Where should I purchase them from?

[rennigade]

You have better odds heading to vegas and throwing it down on black or red. Seriously...the odds are better in vegas than penny stocks.

[ZERisTHE1]

Yea that was the kind of the idea I had too.

[cooliemae]

I would definitely stay away from penny stocks as a serious investment. I've bought penny stocks in the past as part getting a bonuses and still own them. I've noticed a couple of things that are a recurring theme with penny stocks.

1. The scam: The only penny stock that I've owned that actually when above the break even point (including cost of purchase) was a gold mining company that ended up being a scam. I was so excited to see the stock keep going up and up and then straight down as the the real story came out and everyone saw it was a pump and dump scam.

2. Reverse splits: a number of my stocks have done with because their price keeps dropping, so in order to stay listed. Then the stock looks better. Had one that did a 500:1 reverse and all of a sudden the stock price was better tan $3.00 a share. Looks better than a fraction of penny even though the value of the company hasn't changed.

3. Profit is through fluctuations in price: The best stock i've picked with regard to penny stocks is related to the medical marijuana field and in the 2 years i've owned it the share price has has two times were the share price went up 2x-3x times current value. If you can sell during those times you stand to make money, but otherwise it's small fluctuations that don't leave much room for profit when you consider trade cost.

[JohnM.Hendricks]

Penny stocks are common shares of small public businesses that trade at low prices per share. Investing in penny stocks has the following benefits:
Penny stocks are sold at low prices.
Penny stocks are easier to buy.
Penny stock investments minimize the risk of losing a lot of money.
Lower prices mean more shares to buy.

[disneysteve]

Penny stocks are sold at low prices.

This is true by definition. The share price is low. That isn't a benefit in any way. It's just a fact.

Penny stocks are easier to buy.

This is false. Penny stocks often don't trade as regularly as more mainstream stocks so they can be harder to buy.

Penny stock investments minimize the risk of losing a lot of money.

This is also false. Because these are not well-established companies, or they are companies that have fallen on really hard times, dealing in their shares significantly increases your risk of losing money.

Lower prices mean more shares to buy.

I suppose that's true but it's also meaningless. The price of a share has no connection to how that stock will perform. It doesn't matter if you buy 10 shares of stock or 1,000 shares of stock. What matters is how that stock performs after you buy it. I'd much rather have 10 shares of a $100 stock that has a 10% return than 10,000 shares of a $.10 stock that goes bankrupt or has a 25% loss.

[bjl584]

Penny stocks are akin to gambling.

There isn't much research done on companies that are in the realm of penny stocks. You often have no idea what you are buying, what the company really does, or if any of the information that you do manage to find on the company is even true.

You can make a huge amount of money in penny stocks, but it will mostly be luck and have nothing to do with any type of intelligent investment decision or research.

You are better off learning about options. You can make just as much money, but at least options trading is backed by some legitimate research and numbers.

[97guns]

ive lost a lot messing with penny stocks but did hit a couple home runs, pretty sure the home run to strikeout ratio is not very good

[moneysma]

Just be careful what you read about these stocks. Most analysts cover the bigger stocks and therefore there is very little actual, reliable information out there. With the internet, it's easy to start posting on forums/blogs/etc about the "highlights" of a company. They do this just to pump up the price and then bail when the price moves.

Don't fall for the glamor of the "quick buck" with penny stocks. Remember, no wealth comes easily or overnight. Well, expect for winning the lottery but 90% of those people end up broke in 5 years anyways.

[AnnaFaith]

Anna Faith

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[JBinKC]

I think all of the market is a buyer beware event except after a huge sell off of the general market.

With regard to penny stocks American based OTC penny stocks are in most cases bad bets because most don't perform SEC filing requirements. So it is really a mafia controlled racket.

You stand a "better" chance on low priced stocks in markets whose shares are typically priced low like the UK Canada or Australia as they have filing requirements but even institutions can play dirty handed in deliberately keeping a stock price down even under stellar fundamentals especially for a favor of private equity clients intending to acquire it.

[greatm31]

The problem with penny stocks is that it's part of this bad idea that the stock market is a place to get RICH. Think of it as a place to keep up with the growing economy. If you deposit regularly into index funds, you can expect good growth over the years (historically 6-8%) and that will have you set for retirement. It can be fun to invest in individual stocks on the side, but I'd only ever invest 1) in companies that I understand and believe in and 2) using money I'd be willing to lose. Anyway penny stocks are almost always crap companies.

[Green43]

I guess I dont know what all the fuss is about as long as you look at it as gambling, Yes it is risky and odds are you are going to lose all your money. You almost always do in Vegas too. And you dont need a hotel room or a plane ticket. Yes I have a few (3 to be exact) penny or sub penny stocks in my portfolio. I know EXACTLY how much it cost me to aquire them. And I am ok with them dropping to $0 if it happens. I paid less than $50 for each, and it is fun to dream. I know many who spent WAY more than that on lotto tickets that were losers and in the garbage in 3 days. I can sit on mine until they R/S or Bankruptcy into oblivion (very likely), stay stagnant (also likely and I am not out anything, or explode into the next big thing and I got on the ground floor when I retire. Point is I have a chance to hit it big for YEARS (hopefully) I am not out any great amount if they tank and again it is fun to dream. You only want to do your own research, dont listen to stock hypers (ie pump and dumps) Pick an industry you think has potential, buy stock in a startup company and see what happens..JM$.02 Have fun.

[rennigade]

I thought I was going to get rich doing penny stocks back in the day. I think I lost around $600 or $800 in a very short period of time. Lesson learned. I was lucky to only lose that much.

[JudyDunlow]

If you can afford to lose the money you're playing in penny stocks, then why not give it a try. But I'd keep it a very small % of your overall network/portfolio.