So perhaps you have wanted to try your hand at investing in penny stocks. You have heard of unbelievable returns of 100% overnight with financial ‘experts’ claiming extreme gains at a very low risk. All you have to do is buy low and sell high. Easy!
Well 3 years ago this made total sense to me, a financial ‘expert’ said it was a for sure thing. Right? Right. Even better this financial ‘expert’ made me feel like I was an ‘expert’. Boy! What a good deal! I frantically opened my web broker. Excited to make enough money to buy everything I have ever wanted. I proceeded to check the losers by percent list (because that is what the professionals do). I forget what was on the top of the list but I remember that the top loser lost 64% on the price of their stock the previous day. I suddenly got extremely excited with the train of thought ‘Wow, it has already dropped 64%. I can’t go any lower, I’ll buy now and then sell when its gained 40-50%’.
Within 10 minutes of watching a video of a financial ‘expert’ talking about the ’for sure’ gains of penny stocks I had bought $1000 worth of a share that I knew absolutely nothing about. Not even the ticker. I was on the road to success.
For the next couple of days I sat and watched as my stock dropped 3%….8%…..17%….%25. Yes 25%. In a matter of days I lost 25% of my initial investment. I will never know what would have happened if I would have held the stock for 3 years. I quickly placed the order to sell, missing the market close by 2 minutes. When my order went through in the morning I lost not 25% but 27% because the stock price dropped.
Although I lost more money than I wish I would have, I learned a valuable lesson; Stay away from penny stocks.
PS. I told you I would eventually post about how I lost money on penny stocks!
Nothing to be ashamed about. Most of the people rely on financial adviser and other professionals to chose investment targets.
Same as we rely on a mechanic in car shop or doctor. We do not have time to get into tiny details of all the trades in the world. I wish I would.
Financial Independence recently posted..When is 10% annual income savings rate enough?
Exactly, I am glad it was such a small amount and when I was younger. All I can say is lesson learned.
Good to hear that it wasn’t a huge loss. Things could’ve been much worse.
You shouldn’t be flat out telling people to avoid penny stocks though. I’m sure lots of people make good money with them. Like any investment, a lot comes down to being properly educated about what you’re investing in. With the help of a quality adviser, this post could have instead been a story of how you made some decent money with penny stocks.
Modest Money recently posted..Cutting Back At Modest Money
Very true. If people didn’t make money, there wouldn’t be a hype about them. I can admit that my loses were 100% related to not being properly educated in what I was investing in.
[...] to know about finances. I thought I was doing OK, especially because I dabbled in the stock market (and lost on penny stocks). I had a small pile of savings. In my mind, I had it made. However, my biggest flaw was that I [...]