Should I Invest in Penny Stocks?
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Should I Invest in Penny Stocks?
Penny Stocks
A Penny Stock is a stock that trades under one dollar per share ($1).
Many Investors find it enticing to buy a stock at such a low price.
One positive factor is that many shares can be purchased at very low prices. If the stock climbs significantly, a significant profit can be realized.
Usually, a profit is seen when a Penny Stock only increases in value by a few cents.
The Reality of Penny Stocks
Making a profit on a Penny Stock is quite deceiving.
For example, it does not seem that far-fetched to buy a stock at $0.10 per share and then sell it at $0.20 per share.
The first question that should be asked is, “WHY is this stock only $0.10 per share?
If the Stock Market considers this to be a valuable stock, the price per share would be much higher.
For every thousand stocks that may be bought under $1 per share, perhaps ONE will climb in value.
More importantly, these stocks are often so thinly traded that the Bid/Ask Spread is typically very large.
Not only is it difficult to sell at a favorable price, finding a buyer on the other end of the transaction can take time or may not be possible.
High-Quality Stocks
The SPX Investing Program does not teach about Penny Stocks or even give them much regard.
Investing in Penny Stocks should be considered gambling.
The S&P 500 Index (SPX) is comprised of much higher-quality stocks.
Stocks of high value and quality are usually referred to as Blue Chip Stocks.
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