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Simple rule: Don’t ever buy a penny stock

October 3, 2011, 1:38 PM

Commentary

By Cody Willard

The two questions I am asked about the most by people on the streets, in the grocery store and even stuck in traffic next to each other, are:

Should I be invested in penny stocks?

Should I be invested in the Iraqi dinar?

I always answer those two questions in just about the exact same way: Hell no! Do not invest in penny stocks! Do not invest in the Iraqi dinar. Today’s column is about why you shouldn’t ever trade penny stocks. Tomorrow I’ll explain why the “buy Iraqi dinars before the coming revalutions” is a stupid scam. Let’s talk penny stocks for now though.

A couple years ago, I got a call from a buddy of mine who said that ZZ Top was going to be playing at the Beacon theatre in NYC and that Billy Gibbons and his wife were fans of mine from my TV show and that they wanted to meet me. And the night of the concert, I got to hang with Billy backstage before the show and then got to drink beers and even jam on his Les Paul after ward on the ZZ Top tour bus. Billy talked a lot about how great the Inn of the Mountain Gods in my home town of Ruidoso is and his wife who was also very cool, mainly grilled me about stocks, including several penny stocks that she owned. I told her to sell them all immediately.

I checked on the only one whose symbol I could remember when ZZ Top came back through my hometown this past week. It was down from 17 cents to 0.05 cents. That is, 1/20 of one cent. Down from 17 cents. More than a 90% drop from that 17 cent level where “it just can’t drop much further than that can it.”

The very same day after checking on that doomed penny stock of hers, I was answering the flurry of questions by the guy sharpening my chain saw the other day after he recognized me as a “financial expert from TV” and the discussion quickly turned to whether or not he should start trading “penny stocks to make a fortune. I see all these people making tons of money trading penny stocks. Shouldn’t I be doing the same?” My short answer was: Please, don’t ever trade a stock that’s below $5 per share.

In this article I’m linking to here, David Merkel explains why in this absolute must-read for every body who’s ever been tempted by those ads you see on Yahoo! Finance and elsewhere about trading penny stocks. Please read this article about why you should never invest in penny stocks if you own any penny stocks or are thinking about ever trading penny stocks.

On Penny Stocks – Some key quotes from David in the article:

I am often a fan of neglected small cap stocks. When I find a good one, I add it to my portfolio. But I am generally not a fan of stocks that trade below $1.00. Why? Because there are many promoters of the stocks who deceive those who are illiterate regarding the markets, promising big gains, but end up delivering significant losses.

I see lots of penny stock ads. Big deal. But one ad got under my skin. This article was motivated by an ad that said, “Penny stocks made me rich.” Now, there may be a handful of people for which that is true, but in general, those that invest in penny stocks lose money.

There is a constant in investing, that amateurs who invest in volatile asset classes tend to lose money, and more money as the asset classes get more volatile. Penny stocks are volatile in the extreme. Even leaving aside the promoters who pump-and-dump, it is a rare person who can approach these in a businesslike manner.

I don’t know exactly why there’s so much correlation between the fact that it’s almost always people who know me from TV that ask about the penny stocks and/or the Iraqi dinar. Other folks, like my readers on Marketwatch and of my articles in the FT, WSJ, and so on, write me questions about Apple or Google or the broader economy. Or why I have been short LPS and Wells Fargo and what my latest opinion of Citigroup and General Electric are. Regardless, the point is, that everybody needs to know two very simple rules of investing:

Don’t trade penny stocks. And don’t buy into the Iraqi dinar scam. More on the latter one tomorrow.

Be sure to check out my brand new independent book, Ten Tech Stocks for the Next Ten Years, at 10Stocksfor10Years.com for $10 (none of which are penny stocks and all of which have some risk to them of course!).

And be sure to check out my Revolution Investing Newsletter published here on Marketwatch.

Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com. At time of publication, Cody was net long Apple and Google and short LPS and WFC.

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Removed link to book pumper's site
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Simple rule: Don’t ever buy a penny stock

October 3, 2011, 1:38 PM

Commentary

By Cody Willard

The two questions I am asked about the most by people on the streets, in the grocery store and even stuck in traffic next to each other, are:

Should I be invested in penny stocks?

Should I be invested in the Iraqi dinar?

I always answer those two questions in just about the exact same way: Hell no! Do not invest in penny stocks! Do not invest in the Iraqi dinar. Today’s column is about why you shouldn’t ever trade penny stocks. Tomorrow I’ll explain why the “buy Iraqi dinars before the coming revalutions” is a stupid scam. Let’s talk penny stocks for now though.

A couple years ago, I got a call from a buddy of mine who said that ZZ Top was going to be playing at the Beacon theatre in NYC and that Billy Gibbons and his wife were fans of mine from my TV show and that they wanted to meet me. And the night of the concert, I got to hang with Billy backstage before the show and then got to drink beers and even jam on his Les Paul after ward on the ZZ Top tour bus. Billy talked a lot about how great the Inn of the Mountain Gods in my home town of Ruidoso is and his wife who was also very cool, mainly grilled me about stocks, including several penny stocks that she owned. I told her to sell them all immediately.

I checked on the only one whose symbol I could remember when ZZ Top came back through my hometown this past week. It was down from 17 cents to 0.05 cents. That is, 1/20 of one cent. Down from 17 cents. More than a 90% drop from that 17 cent level where “it just can’t drop much further than that can it.”

The very same day after checking on that doomed penny stock of hers, I was answering the flurry of questions by the guy sharpening my chain saw the other day after he recognized me as a “financial expert from TV” and the discussion quickly turned to whether or not he should start trading “penny stocks to make a fortune. I see all these people making tons of money trading penny stocks. Shouldn’t I be doing the same?” My short answer was: Please, don’t ever trade a stock that’s below $5 per share.

In this article I’m linking to here, David Merkel explains why in this absolute must-read for every body who’s ever been tempted by those ads you see on Yahoo! Finance and elsewhere about trading penny stocks. Please read this article about why you should never invest in penny stocks if you own any penny stocks or are thinking about ever trading penny stocks.

On Penny Stocks – Some key quotes from David in the article:

I am often a fan of neglected small cap stocks. When I find a good one, I add it to my portfolio. But I am generally not a fan of stocks that trade below $1.00. Why? Because there are many promoters of the stocks who deceive those who are illiterate regarding the markets, promising big gains, but end up delivering significant losses.

I see lots of penny stock ads. Big deal. But one ad got under my skin. This article was motivated by an ad that said, “Penny stocks made me rich.” Now, there may be a handful of people for which that is true, but in general, those that invest in penny stocks lose money.

There is a constant in investing, that amateurs who invest in volatile asset classes tend to lose money, and more money as the asset classes get more volatile. Penny stocks are volatile in the extreme. Even leaving aside the promoters who pump-and-dump, it is a rare person who can approach these in a businesslike manner.

I don’t know exactly why there’s so much correlation between the fact that it’s almost always people who know me from TV that ask about the penny stocks and/or the Iraqi dinar. Other folks, like my readers on Marketwatch and of my articles in the FT, WSJ, and so on, write me questions about Apple or Google or the broader economy. Or why I have been short LPS and Wells Fargo and what my latest opinion of Citigroup and General Electric are. Regardless, the point is, that everybody needs to know two very simple rules of investing:

Don’t trade penny stocks. And don’t buy into the Iraqi dinar scam. More on the latter one tomorrow.

Be sure to check out my brand new independent book, Ten Tech Stocks for the Next Ten Years, at 10Stocksfor10Years.com for $10 (none of which are penny stocks and all of which have some risk to them of course!).

And be sure to check out my Revolution Investing Newsletter published here on Marketwatch.

Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com. At time of publication, Cody was net long Apple and Google and short LPS and WFC.

http://blogs.marketw...-a-penny-stock/

Buy the right Penny Stock and you can get very wealthy. Buy the right regular stock, same deal. BUT whether Penny Stock or not, most people that dump money into the stock market lose it. A few make money, and the money they make comes from the losers.

so, i am assuming no one has ever made money in a penny stock. lotto tickets, penny stocks, dinar, the 50:1 at pimlico; all long shots with little to risk for potential (however unlikely) ridiculous return. why the hell not?

Right.

Some people!

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so, i am assuming no one has ever made money in a penny stock. lotto tickets, penny stocks, dinar, the 50:1 at pimlico; all long shots with little to risk for potential (however unlikely) ridiculous return. why the hell not?

I would buy a hell of a lot more Lotto tickets if the odds were 50:1! Heck, i'd buy alot more dinar too if a RV had those kinda odds!

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so, i am assuming no one has ever made money in a penny stock. lotto tickets, penny stocks, dinar, the 50:1 at pimlico; all long shots with little to risk for potential (however unlikely) ridiculous return. why the hell not?

Of course they have. That's not the point. People have lost many times more that they have ever won in those things. As a general rule, it's very good advice to tell people NOT to "invest" in them. Chances are, you would be much further ahead NEVER investing in those things than by investing in them. I think the dinar is worse than most of them. At least when you play the lottery, you know your odds of winning and you have a bona fide opportunity, regardless of how slim it is, to win. I doubt very few people here understood anything about the dinar or the chances of a revaluation BEFORE they bought. Most people only found it was a long shot (or no shot) AFTER they sent their US dollars away. The dinar was a perfect storm of internet, ignorance and desperation. It's too bad people didn't know as much about it as they do about the lottery before they buy a ticket. Willard is giving sound, prudent advice.

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Simple rule: Don’t ever buy a penny stock

October 3, 2011, 1:38 PM

Commentary

By Cody Willard

The two questions I am asked about the most by people on the streets, in the grocery store and even stuck in traffic next to each other, are:

Should I be invested in penny stocks?

Should I be invested in the Iraqi dinar?

I always answer those two questions in just about the exact same way: Hell no! Do not invest in penny stocks! Do not invest in the Iraqi dinar. Today’s column is about why you shouldn’t ever trade penny stocks. Tomorrow I’ll explain why the “buy Iraqi dinars before the coming revalutions” is a stupid scam. Let’s talk penny stocks for now though.

A couple years ago, I got a call from a buddy of mine who said that ZZ Top was going to be playing at the Beacon theatre in NYC and that Billy Gibbons and his wife were fans of mine from my TV show and that they wanted to meet me. And the night of the concert, I got to hang with Billy backstage before the show and then got to drink beers and even jam on his Les Paul after ward on the ZZ Top tour bus. Billy talked a lot about how great the Inn of the Mountain Gods in my home town of Ruidoso is and his wife who was also very cool, mainly grilled me about stocks, including several penny stocks that she owned. I told her to sell them all immediately.

I checked on the only one whose symbol I could remember when ZZ Top came back through my hometown this past week. It was down from 17 cents to 0.05 cents. That is, 1/20 of one cent. Down from 17 cents. More than a 90% drop from that 17 cent level where “it just can’t drop much further than that can it.”

The very same day after checking on that doomed penny stock of hers, I was answering the flurry of questions by the guy sharpening my chain saw the other day after he recognized me as a “financial expert from TV” and the discussion quickly turned to whether or not he should start trading “penny stocks to make a fortune. I see all these people making tons of money trading penny stocks. Shouldn’t I be doing the same?” My short answer was: Please, don’t ever trade a stock that’s below $5 per share.

In this article I’m linking to here, David Merkel explains why in this absolute must-read for every body who’s ever been tempted by those ads you see on Yahoo! Finance and elsewhere about trading penny stocks. Please read this article about why you should never invest in penny stocks if you own any penny stocks or are thinking about ever trading penny stocks.

On Penny Stocks – Some key quotes from David in the article:

I am often a fan of neglected small cap stocks. When I find a good one, I add it to my portfolio. But I am generally not a fan of stocks that trade below $1.00. Why? Because there are many promoters of the stocks who deceive those who are illiterate regarding the markets, promising big gains, but end up delivering significant losses.

I see lots of penny stock ads. Big deal. But one ad got under my skin. This article was motivated by an ad that said, “Penny stocks made me rich.” Now, there may be a handful of people for which that is true, but in general, those that invest in penny stocks lose money.

There is a constant in investing, that amateurs who invest in volatile asset classes tend to lose money, and more money as the asset classes get more volatile. Penny stocks are volatile in the extreme. Even leaving aside the promoters who pump-and-dump, it is a rare person who can approach these in a businesslike manner.

I don’t know exactly why there’s so much correlation between the fact that it’s almost always people who know me from TV that ask about the penny stocks and/or the Iraqi dinar. Other folks, like my readers on Marketwatch and of my articles in the FT, WSJ, and so on, write me questions about Apple or Google or the broader economy. Or why I have been short LPS and Wells Fargo and what my latest opinion of Citigroup and General Electric are. Regardless, the point is, that everybody needs to know two very simple rules of investing:

Don’t trade penny stocks. And don’t buy into the Iraqi dinar scam. More on the latter one tomorrow.

Be sure to check out my brand new independent book, Ten Tech Stocks for the Next Ten Years, at 10Stocksfor10Years.com for $10 (none of which are penny stocks and all of which have some risk to them of course!).

And be sure to check out my Revolution Investing Newsletter published here on Marketwatch.

Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com. At time of publication, Cody was net long Apple and Google and short LPS and WFC.

http://blogs.marketwatch.com/cody/2011/10/03/simple-rule-dont-ever-buy-a-penny-stock/

No stocks below $5? So you'd never own Ford. I bought Ford at 2.50 a while ago and it closed up today at 10.08.

Buy the right Penny Stock and you can get very wealthy. Buy the right regular stock, same deal. BUT whether Penny Stock or not, most people that dump money into the stock market lose it. A few make money, and the money they make comes from the losers.

Right.

Some people!

Steve Wynn doesn't build casinos on the "winners."

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Of course they have. That's not the point. People have lost many times more that they have ever won in those things. As a general rule, it's very good advice to tell people NOT to "invest" in them. Chances are, you would be much further ahead NEVER investing in those things than by investing in them. I think the dinar is worse than most of them. At least when you play the lottery, you know your odds of winning and you have a bona fide opportunity, regardless of how slim it is, to win. I doubt very few people here understood anything about the dinar or the chances of a revaluation BEFORE they bought. Most people only found it was a long shot (or no shot) AFTER they sent their US dollars away. The dinar was a perfect storm of internet, ignorance and desperation. It's too bad people didn't know as much about it as they do about the lottery before they buy a ticket. Willard is giving sound, prudent advice.

We'll see won't we?tongue.gif

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and while we're at it; believing $1200 is guaranteed to become millions in any investment is a tad wild. but it can happen. just the chances are it won't. i like gambling.

ME TOO! and the long term odds are TOTALLY in my favor...short term for big money, it's a coin toss, but the ROI possibilities makes this a NO BRAINER!

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Simple rule: Don’t ever buy a penny stock

October 3, 2011, 1:38 PM

Commentary

By Cody Willard

The two questions I am asked about the most by people on the streets, in the grocery store and even stuck in traffic next to each other, are:

Should I be invested in penny stocks?

Should I be invested in the Iraqi dinar?

I always answer those two questions in just about the exact same way: Hell no! Do not invest in penny stocks! Do not invest in the Iraqi dinar. Today’s column is about why you shouldn’t ever trade penny stocks. Tomorrow I’ll explain why the “buy Iraqi dinars before the coming revalutions” is a stupid scam. Let’s talk penny stocks for now though.

A couple years ago, I got a call from a buddy of mine who said that ZZ Top was going to be playing at the Beacon theatre in NYC and that Billy Gibbons and his wife were fans of mine from my TV show and that they wanted to meet me. And the night of the concert, I got to hang with Billy backstage before the show and then got to drink beers and even jam on his Les Paul after ward on the ZZ Top tour bus. Billy talked a lot about how great the Inn of the Mountain Gods in my home town of Ruidoso is and his wife who was also very cool, mainly grilled me about stocks, including several penny stocks that she owned. I told her to sell them all immediately.

I checked on the only one whose symbol I could remember when ZZ Top came back through my hometown this past week. It was down from 17 cents to 0.05 cents. That is, 1/20 of one cent. Down from 17 cents. More than a 90% drop from that 17 cent level where “it just can’t drop much further than that can it.”

The very same day after checking on that doomed penny stock of hers, I was answering the flurry of questions by the guy sharpening my chain saw the other day after he recognized me as a “financial expert from TV” and the discussion quickly turned to whether or not he should start trading “penny stocks to make a fortune. I see all these people making tons of money trading penny stocks. Shouldn’t I be doing the same?” My short answer was: Please, don’t ever trade a stock that’s below $5 per share.

In this article I’m linking to here, David Merkel explains why in this absolute must-read for every body who’s ever been tempted by those ads you see on Yahoo! Finance and elsewhere about trading penny stocks. Please read this article about why you should never invest in penny stocks if you own any penny stocks or are thinking about ever trading penny stocks.

On Penny Stocks – Some key quotes from David in the article:

I am often a fan of neglected small cap stocks. When I find a good one, I add it to my portfolio. But I am generally not a fan of stocks that trade below $1.00. Why? Because there are many promoters of the stocks who deceive those who are illiterate regarding the markets, promising big gains, but end up delivering significant losses.

I see lots of penny stock ads. Big deal. But one ad got under my skin. This article was motivated by an ad that said, “Penny stocks made me rich.” Now, there may be a handful of people for which that is true, but in general, those that invest in penny stocks lose money.

There is a constant in investing, that amateurs who invest in volatile asset classes tend to lose money, and more money as the asset classes get more volatile. Penny stocks are volatile in the extreme. Even leaving aside the promoters who pump-and-dump, it is a rare person who can approach these in a businesslike manner.

I don’t know exactly why there’s so much correlation between the fact that it’s almost always people who know me from TV that ask about the penny stocks and/or the Iraqi dinar. Other folks, like my readers on Marketwatch and of my articles in the FT, WSJ, and so on, write me questions about Apple or Google or the broader economy. Or why I have been short LPS and Wells Fargo and what my latest opinion of Citigroup and General Electric are. Regardless, the point is, that everybody needs to know two very simple rules of investing:

Don’t trade penny stocks. And don’t buy into the Iraqi dinar scam. More on the latter one tomorrow.

Be sure to check out my brand new independent book, Ten Tech Stocks for the Next Ten Years, at 10Stocksfor10Years.com for $10 (none of which are penny stocks and all of which have some risk to them of course!).

And be sure to check out my Revolution Investing Newsletter published here on Marketwatch.

Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com. At time of publication, Cody was net long Apple and Google and short LPS and WFC.

http://blogs.marketwatch.com/cody/2011/10/03/simple-rule-dont-ever-buy-a-penny-stock/

Hey HOT SHOT we don't need a nanny around here, so take your Pulitzer Prize winning books and peddle them on the other side of town. The only reason you got on here was to try to sell books. Go RV

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