No. of Recommendations: 4
I'd like to vent a little, and share my experience.
I am a new investor, and joined TMF after reading the items on the site for over a year. I have purchased some very nice positions in my IRA and have made a few good decisions in my brokerage account with the insight this site has given me. I guess I got a little cocky and too sure of myself, because I took the bait on one of those "sure thing" penny stock ads you see on several of the financial boards. I got my first taste of getting screwed royally, and lost on what I thought was a good investment. Not once, but twice. I now see the pattern of how it happens, and this is what I'd like to share with you, so you don't make the same stupid mistake I made.
First, the ad promises a good return. The company profile looks good, is a legitimate company, and all looks well. It is not the company, but the volatility of the stock at this small value that does the damage. Any itty-bitty move in price can make or cost you dearly. On the two stocks I bought, both were quite low. The stocks rose nicely for the next two days. I had nearly made 30 to 40% increase in my initial investment. Real neat. So far, so good. The next day, I went to check my accounts and found MAJOR profit-taking...i.e. sell-off, had occurred at the beginning of the trading day. With the delay of the ticker, by the time you knew about it and any email alerts can be sent out, you have already lost your money. I can only figure the sell-off was made as a sell order after the end of the previous market day, so the trade would occur at the beginning of the next day. Looking at the sales volume at the time of the "tanking" of the stock, only a very few people made gobs of money, at my expense. For folks like me that can't be by their computer screens at all waking hours, you can't do anything but wait until you get home to see your money vanish. The lesson I learned is this: Stay away from penny stocks, unless you can babysit the stock for the entire time you own it. If you see a bargain that is too good, it probably is. If you MUST buy into a penny stock, limit your exposure to, say, $100 or less. And last, make your short-term profit and GET OUT. Paying the broker fees to get out sure beats getting majorly screwed when the stock tanks. There is an article recently on TMF that deals with issues like mine, that prompted me to write this little rant. Like I said, I am a new investor, and am learning, and this is a very painful lesson, which will stay with me for a long time....
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