Are there any penny stocks that actually turn out OK for the people who buy them? How do you identify them?
I downloaded RobinHood, the new app that everyone has been going crazy over, about six months ago. It comes with a free stock and the stock I received was 1 share in Plug Power (PLUG). The stock at the time was around $2.50 a share. It's since gone up to $13.10. So hell of an investment for me...especially since it was free. Too bad I don't have 10,000 shares instead of 1.
But it got me to thinking about penny stocks and whether there was any approach to investing in those. All I hear is that it's a really bad idea, but if there is a good strategy for this, it could provide big returns.
Answers ( 1 )
Well, you're extraordinarily unlikely to find a good strategy for trading penny stocks here (or anywhere else on the internet).
If such a strategy exists, then it would make sense for the discoverer of the strategy to NOT share it with anyone else -- because the more people know a strategy, the less effective it would be.
But no such strategy exists because no one (apart from people who have insider information about the companies involved) has enough information to know whether a stock -- especially a penny stock, which by definition is being traded at a very low price and is likely on the verge of bankruptcy -- is going to suddenly recover or continue into insolvency.
In general, trading stocks to make a profit (as opposed to simply buying and holding them, which is profitable because of the overall trend in humanity to create wealth through our efforts and our brains) is a bad idea because you're pitting your knowledge against the knowledge of the market -- and it should come as no surprise that the knowledge of the market is quite considerable. In particular, you're up against billionaires and mega-millionaires who own the companies and who have a lot more resources to make those decisions. They have insider information (both legal and illegal) and trade on it in far higher volumes than you or I can.
So my advice is avoid trying to pick stocks of any sort. Invest in index funds (that is, invest in thousands of companies at once) and focus your time and energy on things that grow value in the world and make it a better place.