Penny stocks???

[Paddy]

Anyone have any experience with these?  I know nothing,zip,nada,zilch about investing and thought this might be a way to learn and maybe make a few dollars without risking a lot.  In the past I have allowed 'financial consultants' to make decisions for me, IRA's, etc.  Usually, they sell me something with a front end load; they get their money and it takes me awhile to even get ahead of that.
http://pennystocks.org/s1_6.php

[Werewolf]

Penny stocks are in general worth exactly what you pay for them - usually - 9999 out of 10,000 times.

But occasionally...

Sometimes a stock decreases in value because the company has hit really hard times. If you believe that it the case and that it can recover then a Few 100 bucks can get you thousands of shares. If a 10 cent stock goes up to a dollar.... The problem with that is if you think the company can recover and think that for good reason then you will not be alone and the stock won't be worth just pennies.

 NOTE: Make sure the stock isn't worth pennies because the company is in or going into bankruptcy. More often than not when it comes out of bankruptcy the stock you have isn't worth the paper it's printed on (LOL! I know - I bought 5000 shares of Jumbo Sports at around a nickel - 6 months later after it reorganized the stock I had was canceled or some such legal tomfoolery...)

Another opportunity are startups that no one believes in. Again a few 100 bucks can get you thousands of shares...

That said liquidity is a key issue with penny stocks. Make sure that enough trade every day that you can get rid of them when you want to and that just the act of buying them won't drive the price up.

Way back in '95 I tried an experiment with Koss - they make stereo headphones and some other audio related equipment. It was a very thinly traded stock. I bought 5000 shares at around $5 IIRC. Within minutes the price went up to around $5.50 or so. I tried to dump 'em. Guess what - no takers. I ended up getting rid of it in 1000 share chunks over the next week or so and about broke even. At the time Koss rarely traded more than a few thousand shares in a day.

Remember high potential gains come with high potential risks.

[grampster]

Try to google motleyfool.com.  I think they had something on penny stocks recently.
They were not too keen on them, I believe.

[Monkeyleg]

Another problem with penny stocks is the spread between bid and ask prices. If the bid is 5 cents and the asking price is 10 cents, you'll have trouble unloading the stock without taking a hit.

[Paddy]

Thanks for that link, grampster.  There's some good info there about broker fees, also.  I'll be getting a small inheritance in a few months and am looking to make it grow.  Most of it, 80% or so,  will be in cash or cash equivalents; CD's, T Bills, maybe muni bonds, etc.  Then 20% will be spread among investments of some kind, and I'm thinking small cap.

[BozemanMT]

Penny Stocks will make your broker rich, but not you.
it's a scam.

[The Rabbi]

Robert Koiyosaki in Rich Dad Poor Dad writes that risk can be mitigated with information.  The mroe you know about something the better you are able to reduce or at least quantify the risk.
So if you are looking at a penny get all the information you possibly can about it, including quarterlies and past annuals.  Read all you can about the industry.  With a penny you can also email them or call and often you end up talking with the CEO (this happened with a penny I own called Epolin, a maker of near-infrared dyes).
If you like the direction the company is going, then buy the stock.  But plan on holding it nealry to forever.

[Paddy]

that risk can be mitigated with information.

Information is vital.  Every previous investment I've ever made has been on the advice of some 'financial professional', who, when they collected a fee up front said "Don't worry, you'll make that up in no time".  heh.  Last one was with Primerica, ever heard of them?

On the broker commissions, I'm seeing them in the $7-$15 range. Any recommendations?

[Felonious Monk/Fignozzle]

You know, I've always been a bit paralyzed by what to believe about investment strategies.
I was SURE at one point money could be made in Options.  Huge corporations running stochastic cosine of Black-Scholes tangentially fragmented GNP-adjusted weather calculations, maybe.

One guy in Mayberry, unlikely over the long haul.

No sooner than I had given up on penny stocks, my wife comes to me when we still lived in Knoxville and exclaimed "Honey! iPix has tanked and it's at 11 cents! Quick-- buy me 5000 shares!".

I pontificated about why iPix was headed into bankruptcy and would soon be overshadowed by the more seasoned Silicon Valley players.  Later that week, they landed exclusive image hosting contracts with eBay, Century 21 Realty, and a couple other juggernauts in the ensuing couple of weeks.

Within 4 months, it had gone up to something like $2.00 per share and then split.
Whodathunkit???

The one place I think I'm developing a pretty good game plan with is distressed stocks like Ford and Firestone when they had their corporate ugly divorce due to the Explorer rollovers, and a few others.

I'm also intrigued by a strategy that a guy put together at www.paytrading.com.
Anybody care to weigh in on that one?