I said I'd start another thread about why I can't get into stocks (and penny stocks in particular.) Bottom line, it's the broker question. *DO* I need one in case I want to start playing around with penny stocks? Is it even possible for individuals to buy/sell stocks without having to go through a broker? The thing that soured me is some stock I owned for years. I wasn't into the stock market and wished I could have sold it when it seemed to stop climbing... but I couldn't (or rather I didn't know how without a broker.) So I ignored it basically. WELL! About a year and a half ago, I got a notification that the company is willing to buy back stock at current value... I only needed to do the paperwork. Whew... I did and received 20 times what I put into it. That wasn't a penny stock issue, though. So anyhow... 1. Was I misinformed that *any* movement with stocks requires a broker? and 2. Considering my main interests are real estate and metals, would penny stocks be a good diversion/hobby without much hope for decent investment income?
They're not listed or traded on the exchanges like "normal" stocks are. You have to go OTC. Firms like Merrill Lynch, JP Morgan, Goldman, Morgan Stanley, Wells Fargo, et al won't be able to help you. If you're inexperienced in stock investing, I'd reconsider your strategy of looking at penny stocks to start getting into the markets. A stock priced at one penny does not HAVE to go up by any means. Read some of the better books recommended here about sound investment principles. Also consider possibly investing in better managed mutual funds.
Thank you for the reply... I've already been researching mutal funds and will probably take that route. The penny stocks would just be a hobby of sorts... maybe I should consider a less risky hobby. Like bungee jumping?! You mentioned "a stock priced at a penny"... are you saying that's a literal term? I have always been under the impression that "penny stock" was just a term for stocks that were under a dollar. There are some that are literally a penny?!
Some are one cent. Others are higher. I occasionally find a jewel trading below $1 that rockets up into single or double digits in a fairly short time. If the company stumbles upon a unique product or service, is making lots of money, or finds a better way to make money or whatever, you can find penny stocks here and there that are undervalued. Usually you'll start to see things like increasing volume and that the big boys start buying them if this is the case. I like this company and have owned a few hundred shares for a while now. They were well below a dollar a year to a year and a half ago. http://finance.yahoo.com/echarts?s=BLDP+Interactive#symbol=BLDP;range=5y I also own a little of a company they supply called Plug Power that was also a penny stock recently. I don't like it as much as BLDP though. http://finance.yahoo.com/echarts?s=PLUG+Interactive#symbol=PLUG;range=6m
Penny Stocks are Tim Sykes area of expertise, I checked out some of his lectures and presentations a few years back. If you're very interested in Penny Stocks I would recommend checking out his site specifically Profit.ly. And some of his students have been very successful on their own. He has one site were you can follow the moves his students are making.
I would second JR Ewing's notion about mutual funds. My dad has been selling mutual funds for 30 years. It is definitely a much safer and more reliable option. You do have to be willing to stay in it for the long run.
Yeah, for those who don't have the time, aptitude, or temperament, it's not a bad idea for someone investing for the longterm who's willing to take a little risk to let a handful of the world's best money managers do it for them. Some of the smartest and most successful people - surgeons, lawyers, oilmen, etc - invest at least some of their liquid fortnes in investment funds. They get the benefit of expertise and extensive research without having to do anything themselves, and it's generally less risky for such busy people than trying to pick stocks themselves or whatever.
Mutual Funds are great as a start or as an investment tool for those who don't have too much time/passion/knowledge so they prefer to let others invest for them. I started my investing "career" with mutual funds but later on let go of them since I preferred to own shares directly. As for penny stocks... they are quite dangerous. I'd recommend to start with something safer, such as mutual funds or shares from larger, well known companies.
So do a majority of people go the mutual fund route? And is it only less volatile only because you aren't making the choices yourself?
Many investors do, and some ETFs are also good as well. The better fund managers tend to lose less when the markets tank, and tend to beat the markets quite a bit over time. They tend to have a lower overall level of risk in their portfolios than the broad markets - they usually have at least a little cash, have carefully selected the stocks they own, and may at times have some $ in alternative assets such as commodities, real estate, or bonds. So even the best may underperform the market in an usually exuberant year like 2013, when the markets were up roughly 32%. But the best money managers will generally be more consistent over the long haul and have far less downside in a bad year like '08. Check out Warren Buffett's Berkshire Hathaway vs the S&P over nearly half a century: http://www.thebuffett.com/performance.html