Should You Invest In Penny Stocks?
A few years ago, I became exposed to a local company that looked to have some serious potential. I was excited and felt fortunate to know about the company at such an early stage. In fact, I knew about the company before it even went public. When the day came and the company went public, I bought shares. I bought a lot of shares. After all, I was young and I was willing to take some risks for the possibility of a serious pay out. So, what happened? How did the investment pan out?
After several years of watching the share price slowly dwindle, I just received word that the company went bankrupt. The shares are worth a small fraction of a penny each.
The investment turned out to be a joke. The reality is that most of the stocks that are considered “penny stocks” are companies that have a slim chance of making it. Very few companies push through the tough growth stage that the equity offering is attempting to fund. Since your odds are slim at making a successful investment, you are better off ignoring all penny stocks.
If you are interested in learning how to exploit penny stocks, check out Tim Sykes’ blog over at www.timothysykes.com. Tim is exceptional at shorting penny stocks that have been “pumped” up by hype. He goes into detail each day about what companies are poised for a fall and has a fun time exploiting the pathetic characteristics of many of these companies.
While the poor investment decision was painful, it was a great lesson learned. I am fortunate to have experienced the pain and learned the lesson at such an early age with the majority of my investing in front of me.
For most young investors, I recommend sticking to companies with proven growth in the past and potential growth in the future. Invest in companies that have shown they can perform in tough economic environments. Ignore any penny stocks that you hear someone hyping as the next big thing.