Trading in penny stocks
Last year I bought 300 shares of a penny stock at 45 cents a share and another 200 at 35 cents share -- each lot from a different briker. I guess you could call these speculative, but I'm wondering if you can render any advice to a person like me who can deal only in the lower echelon of the stock market and buy only in small lots. -- K. B.
Penny stocks, those selling for less than $1 a share, tend to be speculative but not always. Many penny stocks are traded on the Spokane, Washington, exchange. These are mainly stocks of small, highly speculative mining companies. One system calls for investing in a number of companies, buying 200 or 300 shares of each, on the theory that one will make it big and offset losses on the others that didn't. Or you can investigate each company thoroughly and try to pick those the appear less risky.
Better than either, in myu view, is to avoid penny stocks altogether. You will likely do better investing in 25 shares of a $2 stock than in 200 shares of a 25-cent stock. In either case you will be paying substantial borkers' fees figured as a percentage of your investment. If you expect to invest regularly, I suggest you accumulate funds in a savings account or credit union until you have $500 to $1,000. Invest those funds in a known stock. Only when you have enough cash that you can afford to lose some should you be investing in typical penny stocks.