Penny Stocks: What's Your Take?

**disneysteve** · 04-01-2009, 09:49 AM

I think you are better off day-trading with established companies, many of which are currently trading near penny stock levels. For example, I just recently bought Bank of America at $5 and sold at $8.06. On Friday, it was about $6. Right now, it is $7.10. There are numerous companies that are making swings like that, a dollar or more per day. I think that's where the day trading activity is right now.

**financialnut** · 04-01-2009, 10:18 AM

Great! Thanks for the tips.

So- I currently use Fidelity for my money market emergency fund and my long term retirement savings. Should I just go ahead and do my day trading with them as well? What should I look out for? I don't want to get hit with a bunch of fees because they're not a great day trading company.

Actually, Steve, I've never really done any day trading. So articles, tips, or advice that you have would be great. I was thinking of snatching up some Ford or Bank of America myself.

Oh- and how much am I typically paying out to my brokerage for investing? x percent on the earnings? x-amount per transaction or trade?

**disneysteve** · 04-01-2009, 11:12 AM

I am NOT a day trader, so I'm the wrong person to ask those questions to. I've just been dabbling in some short-term trades recently with fun money (pretty much the same as you). The hard core day traders do all kinds of specialized things that I don't have a clue about.

Fidelity is probably not who you want to use. Check their commission rates. I use Scottrade. They charge $7/trade. There are companies that are even cheaper.

**bjl584** · 04-01-2009, 12:24 PM

Some companies will charge extra for trading penny stocks, so do your homework before setting up an account with anyone. There are several forums out there that will teach you all about day trading. Just do a Google search. I would personally caution against day trading or playing penny stocks. You can make huge profits, but you can also lose your house. If you can keep it to your fun money only, then go for it. But don't make this practice the bulk of your portfolio.

**financialnut** · 04-01-2009, 02:43 PM

@bjl584: That's good. I'll have to spend some time reading. And I guess that's all it really boils down to: Do your research and read plenty of things online.

I am ONLY doing this for funny. I'm only 24 years old and I have my retirement in index funds that are well diversified.

**JBinKC** · 04-10-2009, 11:47 AM

If you choose to play penny stocks I would recommend buying those on foreign exchanges where they are regulated like the TSX/TSX venture, LSE or All Ordinaries exchanges. A large chunk of U.S. based penny stocks have no financial filing requirements with the SEC and are for the most part fraudulent.

**financialnut** · 04-10-2009, 10:57 PM

Originally posted by JBinKC View Post

If you choose to play penny stocks I would recommend buying those on foreign exchanges where they are regulated like the TSX/TSX venture, LSE or All Ordinaries exchanges. A large chunk of U.S. based penny stocks have no financial filing requirements with the SEC and are for the most part fraudulent.

Seriously? "... for the most part fraudulent?"

How can that be confirmed?

**JBinKC** · 04-11-2009, 08:17 AM

In my experience it is wise to avoid all pink sheeted and most bulletin board stocks that are DOMESTICALLY based. Those companies face no SEC regulation whatsover. As an investor you are exposed to very poor balance sheets of some wacky concept and most of the companies end up to be huge dilution traps hence the low price for the stock (some that have been naked short sold past their float) {See deep capture Blog} and face up to 100% spreads between the bid and ask or they are setup as pure shell companies by the mafia and resemble the bucket shop stocks of the 1800s. The few legit ones perpetually get stink valuations and in most cases don't get discovered by the investing public. PEs are about 1/3rd or worse of what is typically given on a major exchange.

Most financial institutions are also restricted from investing on listings that are strictly limited to those exchanges.

There number one exception where a bulletin board stock makes sense to buy is one that is in the process of attempting to list on the NYSE alternext or NASDAQ but they are usually single digit stocks at the time. They usually get at least a 100% boost in price between the time frame when the stock makes the announcement to a month after the stock has listed on the major exchange. Those stocks are very much worth your time to sift through.

**project15** · 04-13-2009, 02:45 PM

I use Online stock trading, low-cost discount broker, stock market trading and investing. Sogotrade. . I've used them for about a month and got 100 free trades for the first month (with a $500 account min). After that, trades are only $3 which is the lowest I've found. I have no problems with them. It took about a week to setup and transfer funds initially, but once the money is transfered, trades are instant and very easy. HIGHLY recommend.

They do charge a little more for penny stocks. I've stuck to stocks in the $3-$5 range so far. Thinking about buying 1 GOOG stock though (currently around $380)

I've currently only played around with about $500 so it's not a huge risk, but you'd be surprised at how stressful it is when it's REAL money and not just 401k or IRA money.

**DFrancis** · 04-15-2009, 08:48 AM

penny stocks

Over the long hall you are much better putting the extra money in to low cost index funds offered by Vanguard, Fidelity, or even Schwab. Schwab index funds now have a low min of $100. The expense ratios are higher than the Vanguard funds, but the min on most Vanguard funds are $3K.

DF

**EEinNJ** · 04-15-2009, 01:13 PM

"Back when I was your age"....before the days of Internet stock trading, I learned my lesson about penny stocks, commodities, IPO's. For the little guy, it's a sucker's bet. I won a few, lost a few, and would have broke even except for losing a few thousand on a heating oil option. Perhaps in the long run the experience I gained when I was 25 kept me from making more expensive mistakes later on. But for "fun" money, if I had bought something like a Martin guitar, it would be worth a lot more 20 years later and given a lot more enjoyment.

**financialnut** · 04-16-2009, 02:40 PM

Originally posted by EEinNJ View Post

"Back when I was your age"....before the days of Internet stock trading, I learned my lesson about penny stocks, commodities, IPO's. For the little guy, it's a sucker's bet. I won a few, lost a few, and would have broke even except for losing a few thousand on a heating oil option. Perhaps in the long run the experience I gained when I was 25 kept me from making more expensive mistakes later on. But for "fun" money, if I had bought something like a Martin guitar, it would be worth a lot more 20 years later and given a lot more enjoyment.

And I suppose you're right. You have to consider what the trade off will really be. I haven't dropped any money into penny stocks as of yet, and I probably won't now because of everybody's great advice. I sure appreciate what you are all doing here!

**KevinCarr** · 04-23-2009, 02:37 PM

No on the Penny Stocks

Originally posted by financialnut View Post

Here's the situation:

Each month my wife and I get x-amount of dollars to spend on things that we want. We call these budgeting boons our "Leisure Funds." We both get the same amount.

I don't want anything right now. I'm not the type of person looking for new computers, clothes, iPods, etc...

So I thought I would take my money and get into some penny stocks. Because this money is otherwise spent on frivolous nothings, I can afford to lose it.

So- does anybody have any tips on penny stocks? I want to try my hand at some light day trading, and would love to get steered in the right direction!

The only way a person makes money in Penny Stocks is to own the penny stock company and sell the worthless shares to the public. I have always been burned on penny stocks.

Penny Stocks: What's Your Take?