Penny Stocks 

Firstly, OTC stocks are not for the faint of heart.  Just when you think a stock can’t go any lower—it can.  Often, without any logical or apparent reason, you’ve lost half your money in a day’s time.  The converse is also possible—a nice little double or triple.  It’s like Vegas from the comfort of your web browser.  Let’s be clear about this: most penny stocks are not “investments.”  There is generally a reason a company isn’t listed on a major exchange, but there are those rare companies that are simply overlooked and have the potential to be huge.  We’ve all heard wannabe millionaire stories, “If I had only bought <fill in the blank> when it was $0.05 I’d be rich!”  Those kinds of gains usually can’t be found investing in well-established companies.  While a company’s stock price may appreciate significantly, the potential has generally been built into the price. 

Speculative investing should not be your primary strategy, but should augment a well balanced portfolio and should only be considered if you are comfortable with the associated risks.  I will be diligently watching and researching various companies that I feel have potential, but I will disclaim actual endorsement for its purchase.  I encourage you to use your best judgment, personal research, and the information provided to build a case for your own investment.

Staying in the game 

Most of us lead busy lives that don’t always allow for adequate research and daily monitoring of our portfolios.  Most everyone wants to put the money they have to work for them, but are afraid to manage their funds themselves or are simply bored by it.  If you have an interest (that’s why you’re here, right?) in choosing your own path to prosperity, then you’ve got to keep it interesting. Here are a few rules for stocks with high risk profiles: 

Rule #1: Don’t invest more than you are willing or able to lose.
Rule #2: Don’t rely on anyone for a stock tip that promises to make you rich.
Rule #3: Don’t invest all at once or chase gains. 

I would suggest allocating 5% of your portfolio in to speculative stocks.  This is not limited to penny stocks, but any that you simply have a gut feeling will turn around for some serious appreciation.

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This entry was posted on Tuesday, June 3rd, 2008 at 8:40 pm and is filed under Stocks. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.