Yesterday at work, a fax comes over describing a stock “you must invest in!” The stock has an opening price of .30. Yep, 30 whole cents. Out of curiosity, I check on the stock today and it's up to .60. Woo-hoo! it doubled!
Now, I am not a gambler, but this intrigues me. Is there a way to invest in the stock market if you only have, say, $100 to invest?
It would be more like a hobby, than serious investing. Of course, I COULD pick some stocks and follow them as if I really were investing, but it seems the thrill would be lessened if you know you’re not actaully losing (or, hopefully, gaining) money.
You’re talking “penny stocks,” and any legit broker is going to try very hard to talk you out of investing in them.
As a matter of fact, there are strict rules and regulations about penny stocks (value less than $5, IIRC). For instance, a broker can never recommend a penny stock to a customer unless they have a previous record of investing in them.
There’s a good reason for this. The stock are so cheap because they’re worthless. You stand just as great a chance of the stock dropping from $0.30 to $0.15 and you losing your money. In addition, these type of stocks are lightly traded, which means that, when your stock jumps from $0.30 to $1.00, you still may not be able to find a buyer. They may also be prone to manipulation (there are laws against that, but the SEC may show up too late for you).
If you really want to do it, and have $100 to throw away, give it a shot. But you’d be much better off putting that $100 in a CD.
Track a handful of penny stocks, or any stocks valued at $5.00 and under through financial websites. I recommend www.smartmoney.com for their market tools section. This way, you can research this area of the market and keep your real money out of it.
What’s the harm? I recently bought 50 shares of Kmart for kicks. Over the years I’ve made thousands of dollars in service contracts from them, and even though we rarely shop there, I wish them well in their re-organization.
I find my best investments in real estate, but like to watch the stock market. In an economics class in high school many years ago, the class pooled money and bought penny shares in Southwest Airlines, at the time a small regional airline in Texas. Man, It’s too bad we had to sell the stock at the end of the class because if it had been kept and donated to the school, it would have probably financed every class reunion since.
I had a friend who has an account buy my Kmart stock for me to avoid minimum investment requirements by brokers.
If you lose your money, no big deal, but if it doubles, you’ll feel like an investment whiz. Go for it!
Sometimes penny stocks do pay off. Usually, they do not. The SEC is primarily concerned with brokers actually recommending penny stocks. The “if it goes up one point, your price will double” argument can be very seductive to a beginning investor.
If you’re an experienced investor and able to afford the loss, then you might want to gamble on a penny stock. Just don’t be surprised if you lose it all.
Nasdaq exchange will drop a company’s stock ticker if it performs under $1.00 for 30 consecutive days (if that company’s assets are valued at over $4 million).
From what I’ve read, the implication is that other exchanges (new york stock exchange) would not promote the given co.'s stock ticker either, which gets back to the point that reality chuck made earlier:
“In addition, these type of stocks are lightly traded, which means that, when your stock jumps from $0.30 to $1.00, you still may not be able to find a buyer.”
I missed this part. You got a junk fax telling you to buy the stock? Man, that ought to raise warning bells from here to Washington DC.
That’s the classic pattern for a “pump and dump” scam. The guys sending this “report” (and if they’re using exclamation points, they cannot be a legitimate stock analyst*) already own a large number of shares of this stock. They may have bought it all at $0.15. So they hype the stock so it goes up to $1, sell it all to people who see it’s gone from $0.30 to $1 and think it’s a great deal. Of course, their sale floods the market and the price drops back to $0.15.
This is a scam, and illegal, but they hope to get in and get out before the SEC notices.
Also consider the fact that it’s illegal to send unsolicited faxes. The fact that they’re willing to break the law to hype their stock is about a clear warning of danger as you’re going to get.
You should send the fax to the SEC enforcement bureau, and look into suing them for sending the fax (Hooters just had a $12 million judgment against them for doing the same thing).
*A stock analyst working at a brokerage firm (or anyone with an SEC license) cannot use any sort of hyped-up language in their reports.
Oh, I realize the probable scam angle. It’s still gives me a laugh to see the my money-worshipping boss drool at the possibility of making a few quick bucks.
Still, I’m gonna track this one just to see what happens.
probability wise, penny stocks provide a poor return. However, there’s always someone out there talking about their Uncle or someone they knew who invested $1000 and became a millionaire. Ain’t that easy, although it may be slightly better odds than lottery tickets.
I bet someone bought a whole bunch of those penny stocks @30 cents then wrote those faxes (you can program your computer to find fax numbers), soon as they hit a high enough price they dump them. Then the price of them drops to a penny
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