The problem with penny stocks is for evey winner you can point to, I can point to a dozen with good, improving fundamentals that has not reflected this in the price of the stock. Every person who I talked to that has played penny stocks came away with a negative experience, and in the more typical experience, there was one case where a person had only one out of ten pop on him.
So with penny stocks, IMO it is a good test to see if a person is able to see the big picture in terms of risk. Now, I know one investor here on SI that does pretty well with the stock that sell for several dollars or more. But then he first becomes very knowledgable about the industries he is playing in, and he even go so far as to call the execs at the company with his list of questions, and continues to keep in contact with them. I would go so far as to say I think he is a natural stock picker. But people like him are rare indeed.
But then do not take my word for it. I invite anyone here on this thread to share with us their experience with penny stocks. I think you will find that most if not all have been negative experiences, where they found much more productive and workable investments with the larger issues.
So, you mentioned in your "what if" scenario that if a person placed there money in the stock that went from 25 cents to over 15 dollars, they would be a multimillionare. Now, are you in that "club"? Do you know or have met anyone that is as the result of a stock pick like this? Have you met anyone here on SI that accomplished that feat? Keep in mind that I find that many of the claims made here at SI are someones fantasy. IMO "what if" scenarios have their dangerous side. However, I can tell you that I have met many people who have profited handsomely off of the stock market as an investor/trader in larger cap, higher value issues of stock. I bet you have too.
Now, "what if" I placed my money in MSFT when it was just starting out as a company? A nice daydream. This is what I think of penny stocks, a nice daydream perpetuated by the irrational desire of getting something for close to nothing, sort of like that "free lunch" concept. And I do understand we all have this desire.
Bob Graham |
