What is a Penny Stock? And Why It Is Generally Recommended That You Avoid These

A penny stock, is defined as the stock that is worth five dollars a share or less. It is classified as a penny stock because they’re typically low-carb, high risk stocks that are usually made out of garbage. If you ever seen the movie the Wolf of Wall Street, Jordan Belfort, the star of the movie the Wolf of Wall Street, essentially got rich entirely off of trading penny stocks, or rather than trading, better yet selling them to stupid clients who believes that they were gonna make 10 times the money overnight. Overall, penny stocks or something of a joke in the investment and trading world, and even speculative technical analysis day traders typically stay as far away from them as possible. If you look to legendary investors like Warren Buffett and Charlie Munger, 100% of the time they will tell you to stay is clear from these possible, and two instead other by good companies or diversify. The following blog post will answer the question of what is a penny stock, will look into their chart patterns, and will walk through why you should likely steer clear of them. For more information, subscribe to our blog for additional details and information. 

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My Top Ten Favorite Blue Chip and Penny Stocks Are the following:

What is a Penny Stock?Apple



Berkshire Hathaway

Exxon Mobil





And a host of other companies, read on for more information.

What is a Penny Stock? And Why Their High Fees and Even Higher Betas Are a Message to Steer Clear

A penny stock is typically defined as a stock that is priced at less than $5.00 per share. Most penny stocks are to be avoided, as they are overly volatile, and you can very easily lose all of your money trading these stocks. Funny story about when I was just entering college and was trying my hand as a stock trader and a day trader, I had actually purchased one penny stock, which I had believed to be a pump and dump stock pattern. Overnight, the stock went from 2 cents, up to 13 cents, and back down to a fraction of a penny! I lost thousands of dollars, when just a few hours difference would’ve gotten me to have made nearly 6 times my money overnight! Funny thing was, that the rumor mail on the street for this stock was that it would be dumped almost completely before hours at around 6am, problem was I was too lazy to get up, so I shut the alarm off and went back to sleep, Moral of the story is, don’t trade penny stocks, or at the very least, do your research and set 2 alarms!

Final Thoughts on Penny Stocks, and Why I Do Not Recommend Them

I am a proponent of index fund investing, if you have a real conversation with me, you’ll soon realize that I’m not even big on Blue Chip Dividend Stocks, or Growth Stocks, or even that you should simplify your investing strategy and simply buy the S and P 500. I am a huge fan of Global Diversification, and nothing else. Any different thoughts on penny stocks, be sure to comment down below with your thoughts and opinions, and we’ll get back to you within one business day with a response.




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