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Microcap & Penny Stocks : Tokyo Joe's Cafe / Anything goes -- Ignore unavailable to you. Want to Upgrade?

To: TokyoMex who wrote (18590)	5/17/1998 1:25:00 PM
From: Eski	Respond to of 34592

thestar.com Madhavi Acharya What are penny stocks and junk bonds? Penny stocks aren't suited to all investors We gave David Dean, an investment representative with Edward Jones, a penny for his thoughts on these items. Your buddy tells you about a stock that's sure to be a winner, and the price per share is practically chump change. Don't jump on it just yet, Dean says. Penny stocks aren't for everyone. Penny stocks, those that sell for a very low price, are referred to as speculative shares, meaning they are very risky. One dollar is a recognized maximum price, but there is no formal limit, Dean says. At Edward Jones, $5 is considered the upward limit. In Canada, you'll find many penny stocks traded on smaller stock exchanges such as those in Alberta and Vancouver. The Toronto Stock Exchange has a minimum listing requirement that discourages penny stocks, Dean says. ''It attracts the older, large-r and better known companies.'' But you may have heard of one former penny stock. ''Bre-X started as a penny stock on the Alberta exchange,'' Dean points out. ''It's usually a startup company, mining or high-tech. They're looking for capital, but they have no history of management or profit,'' he says. ''Investors are gambling that they've picked the winner. Generally that's not the case.'' It's that possibility of picking a winner that attracts people to penny stocks, Dean says, despite the tremendous risks involved. ''Many people, I see them everyday, are unprepared for the risks, the possible loss of all their money,'' he says. ''Generally we recommend that if you're investing in penny stock, it's a gamble and should be considered as such.'' A few companies do go on from being penny stocks to flourishing, he adds, but they are few and far between. ''I think the majority of people end up losing their money.'' As for junk bonds, the same warnings apply, Dean says. ''At Edward Jones, we consider junk bonds to have a rating, if they have one at all, of less than BBB, which is considered non-investment grade,'' he explains. They're called junk bonds because the companies are, well, junky. ''They're having difficulty borrowing money through the usual channels. They're looking for capital and will need to offer a higher rate of return. You're taking a risk in exchange for that higher rate,'' Dean says. ''A Canadian bank might pay 5 per cent on a bond. A junk bond might pay 8 or 10 per cent, for instance,'' he says. ''Now, who do you feel more comfortable with?'' It's not that people should never invest in penny stocks or junk bonds, Dean says. People should just understand what they're getting into. ''If you're interested, first of all, don't put all your money there,'' he says. ''And if you do put your money in, be prepared to lose it. It's much better to buy good-quality companies. That's where you want to put your serious money.'' ESKI