The stock market is a “slippery slope”. There are solid investments. And then there are penny stocks.
Your Mom and I went to see “The Wolf of Wall Street”. It was about raping and pillaging gullible investors by selling them “penny stocks”.
Penny stocks are essentially equities that you can buy for “pennies”. I think the formal definition of a penny stock is any security selling for under $5 per share. Most penny stocks sell for under $1 per share. For example, a stock such as “Paul’s Spices” may sell for 10 cents per share. You could draw $100 out of your savings account and buy 1000 shares of Paul’s Spices. The salesman would tell you Paul’s Spices tasted great and the company just signed a contract to sell exclusively to Roundy’s Foods. Paul’s Spices was ready to announce the partnership with Roundy’s and Paul’s Spices stock would “zoom”. That would mean the stock probably would go up in value and might easily reach $1 per share (and you would make $900 on your $100 investment). Whoa. What a tip! It turns out the salesman gets a 50% commission on his $100 sale. Less than $50 goes into buying Paul’s Spices. In the meantime Roundy’s decided to buy spices from somebody else and the government shut down Paul’s Spices operation for unsanitary manufacturing practices. Paul’s Spices is going out of business! Your $100 investment is worth “zero”.
What I have described for penny stocks is fairly typical. Occasionally there is a stock that becomes successful but not very often.
My first advice is don’t invest in “penny stocks”.
My second advice is be willing to lose whatever investment you make in penney stocks. Companies that are valued at under $1 share probably don’t have a very good chance of success.
If you don’t know what to do with your pennies, send them to me.
Santa brought Packer fans a Christmas present. Aaron Rogers is back. Now the Packers make the Playoffs by beating the Bears Sunday afternoon. Yeah, right!
Love,
Dad