| Talon_66 |
I have been thinking about investing some money into penny stocks, until I learn a lot more about the market. Then I'll move into bigger stocks
Can anyone give me any advice? |
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| onestepback |
Penny stocks are usually much riskier since a small change in price ends up in a large percentage gain/loss. You can double or triple your money, or you could lose most of it.
It depends on how much money you are talking about, and how you feel about taking that risk. |
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| rocklee_86 |
quote:
Originally posted by Talon_66
I have been thinking about investing some money into penny stocks, until I learn a lot more about the market. Then I'll move into bigger stocks
Can anyone give me any advice?
LONG post warning
Investing in penny stocks is just giving your money away. It sounds like your looking for shorter term gains, and since you say your new to the market, I'm assuming vast amounts of research will not be done on the stocks chosen. The chances of your actually seeing gains on these stocks is incredibly close to zero.
If your serious about investing, stocks are the way to go, but trading is not, and you should have a very long time horizon (10-20 years plus...stocks are incredibly volatile in the short run, and you would need up to a half a mil to be able to diversify effectively if you wanted to see gains within 1-5 years...even then its gamble)
Depending on who you talk to and where they studied the market, they might tell you it's literally impossible to trade stocks to become rich, due to the fact that the market is so efficient that any "mis pricings" i.e. free lunches are always incorporated into the price before traders can exploit it. Many studies have been done where internet traders (i.e. amatuer traders) have seen their gains drop significantly when they sign up for internet trading. Why? many reasons...with pride actually being the biggest one. If your the type of person that hates to see losses, stocks could be very hazardous to your health.
However, this is only one side to a debate that will probably go on for centuries, and there are so many claimed anomolies and "trends" in the market which will allow the investor who follows them to get rich, you could spend years trying to prove or disprove them all....you could lose/gain a lot of money along the way though. I personally think you'll lose, and if you want to know why pm me.
As i said, this is a very heated debate in economic circles, and I know there are people on this board with much more knowledge on the market then I do so...my flamesuits on.
My advice is if your actually serious about investing, study VERY hard and know the company like the back of your hand. This takes a considerable amount of time and does not mean browse the financial sections on the weekends. You have to study financial statements, company history, managmenet changes, etc. Its a very tough job and theres a reason fund managers get paid the way they do, so to expect an amatuer with no professional training to be able to produce in the same way is unfair. Doesn't mean you shouldn't try...just know what your up against.
If you don't want all that pain in the ass studying, simply invest in a mutual fund...as long as your in it for the long run (10-20 years plus) and you purchase shares consistantly every month (any bank can set up an automatic account for you) your not worried if your fund performs like crap for a few months...in the long run, your seeing gains that would be impossible had you invested in risk free assets.
And for you investment-pros, I know that goes against what i was saying about efficient market theory...but who said I was one of the efficient market guys? lol, i just learned from one.
Anyways, mutual funds allow you to invest in stocks without all the trading, and as long as your reinvesting your dividends, your golden. (didn't einstein say compound interest is the greatest force in the universe?)
Sorry for the boring spiel, but i hope this gets you on your way.
Oh, and if theres one field or industry where its probably good not to emulate the best...it would be investing. Don't try to be Buffett, because it will probably be another 10 lifetimes before you see a guy with a track record like him. His style goes against almost all conventional investing strategies (i.e. diversification...dude has like 10 stocks in Berkshire-Hathaway) yet he is without a doubt the greatest investor of all time. How does he do it? Who the hell knows...but i do know that he is the ONLY person who's capable of investing the way he does. So don't try to be him! lol (but join him if you got 140,000 lying around) |
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| GOT BOOST |
In Summary take your money to Vegas.
Your odds at winning are a lot greater in Vegas than in penny stocks.
Mike |
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