| We're delving a little deeper into penny stocks, Moms, simply because at one time or another in the history of the stock market, many profitable and successful companies started out as penny stocks. Somebody somewhere had done their homework and realized the potential of these companies, and they are now being rewarded handsomely for their efforts.
But, before we jump on the penny stock bandwagon, let's find out what's involved.
And what I have found is: Nope, nope, and nope. Penny stocks are not for beginners in any way, shapes, or form. After much research and reading, I must conclude that we really aren't even going to bother to learn the jargon or what's involved in penny stocks. Forget that some of the blockbusters of today were penny stocks at one time.
I might be a risk taker, but I'm also a cautious risk taker and I, thankfully, know my limits. Penny stocks are way out of my league.
Why the sudden change of heart? Let's look at some of the "red flags" that scared this "BUYandHOLDer" away.
First of all, I located an excellent article on penny stocks provided by the Missouri Secretary of State. Even if we're not going to invest in these types of stocks, it is always important to understand why we're steering clear. Knowledge is power and that power will keep us from losing our shirts in the stock market.
In general I have learned that penny stocks are not traded on any of the exchanges but rather are part of the over-the-counter (OTC) market. Remember when we first learned about NASDAQ? For a quick review on that information visit my previous article on The NYSE, AMEX, NASDAQ.
I just reread that article and noticed that it was a real "hair puller" for me way back then. Sheesh, we've come a long way from then to now. And it went by so quickly!
So…penny stocks are listed on the over-the-counter market. Information on these stocks may only be garnered through a stockbroker, so do-it-yourself investors may not have the same access to these companies as they have for companies traded on an exchange.
The most important bit of advice that I gathered is that penny stocks are so easy to manipulate. Given the stock market in general and as somewhat novice investors, it takes a great deal of knowledge to insure that stockbrokers and traders in the penny stock world are legitimate.
And, as I have read, many are truly helping fledgling companies get off the ground. Obviously penny stocks hold much potential. Some of today's great companies, now listed on the NASDAQ, may have once been struggling newbies with the title of penny stocks.
And one final reason why we need to steer clear. An excerpt from A Guide For Beginning Investors http://mosl.sos.state.mo.us/sos-sec/penstk.html as regards legitimate companies and investors who support them states, "Struggling young companies just starting out are perfect examples. Investment in such a company, held through the company's formative years, can pay off well. Such an astute investment requires three things: the ability to choose the right company, the capital to invest and hold the investment, and luck."
And I'm working very hard on the first thing, "choosing the right company." And I'm hoping for a bull market in the year 2001 to help me with the "capital to invest" thing. And the third thing…luck? Hoping for that in 2001 as well.
Three good reasons for us to pass on penny stocks. Please take a few minutes to read the following resources that I've provided. Penny stocks are still intriguing, but I'll put that intrigue on hold for awhile.
Maybe when my luck takes a turn for the better, I'll reconsider.
So now, when you pass by a penny on the street…pocket it but don't invest it in penny stocks.
Missouri Secretary of State's World Wide Web Site Penny Stocks-A Guide For Beginning Investors.
Penny Stocks home page.
Thank you for joining me,
Joyce |
