Author Topic: Play money - penny stocks or not  (Read 1324 times)

doneby35

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Play money - penny stocks or not
« on: February 08, 2018, 04:31:31 PM »
Let's say you had anywhere between 1k and 5k as play money...

Would you buy penny stocks and risk it all for significant returns?
If yes, which ones would you buy or base your buying decision on?

Or would you rather just add to VTSAX or similar index funds and not gamble with it?

v8rx7guy

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Re: Play money - penny stocks or not
« Reply #1 on: February 08, 2018, 04:38:20 PM »
I would invest it according to my Investment Policy Statement.

ChpBstrd

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Re: Play money - penny stocks or not
« Reply #2 on: February 09, 2018, 03:35:21 PM »
Penny stocks are shell companies, semi-bankrupt zombies, and obsolete business models. Their optimistic marketing will tell you otherwise, but these are usually sad stories with a few parasitic stakeholders collecting rents at the expense of equity owners lured by slick websites and paid bloggers. There are ways to speculate $1-5k that are higher probability. E.g. options.

For example:
GLD the gold ETF is currently $124.77.
If you think the recent correction means this will not trade lower than $123 in the next 14 days, you could buy a bull call spread by doing the following:
   Buy 1 call at the $122 strike
   Sell 1 call at the $123 strike
The net price of this position is currently $0.79 per share, or $790 for 10 contracts controlling 1,000 shares. If in 14 days GLD is above $123, your contracts will be worth $1,000. If below $122, $0 (a loss of $790). If between 122-123, somewhere between those numbers.

This wager offers a 26% gain in 14 days with a risk of losing 100%, so it's similar to the most-hyped penny stocks.

The difference is that with options, you have a statistically defined odds of the stock trading unprofitably. In this example there's a 22% chance of complete loss and a slightly higher odds of partial loss. You can dial in your risk/reward level differently than this example or stock to suit your own preferences.

More info:
https://www.optionseducation.org/strategies_advanced_concepts/strategies/bull_call_spread.html?prt=mx

Telecaster

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Re: Play money - penny stocks or not
« Reply #3 on: February 09, 2018, 03:41:55 PM »
Penny stocks are stupid. 

MaaS

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Re: Play money - penny stocks or not
« Reply #4 on: February 09, 2018, 04:23:51 PM »
I'd just dump any extra money into my typical index funds.

But, if you insist on doing something different with "play money," stay away from penny stocks.  It seems unlikely that throwing money at tiny companies you (probably) know little about will end up well. 

ILikeDividends

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Re: Play money - penny stocks or not
« Reply #5 on: February 09, 2018, 07:55:23 PM »
Let's say you had anywhere between 1k and 5k as play money...

Would you buy penny stocks and risk it all for significant returns?
If yes, which ones would you buy or base your buying decision on?

Or would you rather just add to VTSAX or similar index funds and not gamble with it?
There is risking money to make a return, and then there is flushing your money down the toilet with no realistic hope of a return.  Your odds would be better buying 1-5K in lottery tickets.  Buying penny stocks is a great way to turn $500, literally, into A PENNY.

Not kidding.

The old GM, after it went bankrupt, still kicked around for years trading in the penny market (might still be, for all I know).  What the deluded buyers imagined they owned when they threw money away on that former stock is beyond me.  They sure didn't own anything having any assets.  Now that should be illegal.
« Last Edit: February 09, 2018, 08:15:21 PM by ILikeDividends »

Llewellyn2006

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Re: Play money - penny stocks or not
« Reply #6 on: February 09, 2018, 08:22:47 PM »
Penny stocks are just that for a reason and i don't see any reason to throw good money after bad whether it's "play" money or not. I'd put it in an LIC

doneby35

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Re: Play money - penny stocks or not
« Reply #7 on: February 10, 2018, 03:13:23 PM »
What's an LIC?

Llewellyn2006

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Re: Play money - penny stocks or not
« Reply #8 on: February 10, 2018, 05:08:46 PM »
What's an LIC?

Listed investment company. I'm not sure where you're located, but here in Australia - someone like Argo or Australian Foundation Investment Co or Wilson Asset Management. There's dozens of them, each with their own particular focus or method so it's a matter of finding one that suits you.

JAYSLOL

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Re: Play money - penny stocks or not
« Reply #9 on: February 10, 2018, 05:32:21 PM »
If you just want to lose play money, go to Vegas, you'll have more fun for your dollar.  If I had 1-5k I didn't care about losing and wanted to try to make some money in higher risk gambles I'd rather buy and sell crypto currencies again rather than penny stocks

ChpBstrd

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Re: Play money - penny stocks or not
« Reply #10 on: February 10, 2018, 08:22:08 PM »
If you just want to lose play money, go to Vegas, you'll have more fun for your dollar.  If I had 1-5k I didn't care about losing and wanted to try to make some money in higher risk gambles I'd rather buy and sell crypto currencies again rather than penny stocks

I assume the OP's goal is to gamble with the odds slightly or potentially in his/her favor, rather than definitely against. This would rule out lotteries, casinos, animal races, and penny stocks simply due to the structure of the instrument. Arguably the only gamble with a net positive expected value is to sell options during periods of high volatility.

alanB

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Re: Play money - penny stocks or not
« Reply #11 on: February 12, 2018, 09:36:51 AM »
If you just want to lose play money, go to Vegas, you'll have more fun for your dollar.  If I had 1-5k I didn't care about losing and wanted to try to make some money in higher risk gambles I'd rather buy and sell crypto currencies again rather than penny stocks

I assume the OP's goal is to gamble with the odds slightly or potentially in his/her favor, rather than definitely against. This would rule out lotteries, casinos, animal races, and penny stocks simply due to the structure of the instrument. Arguably the only gamble with a net positive expected value is to sell options during periods of high volatility.

It is possible to make money with negative expected value, just like it is possible to lose all of your money with a positive expected value.  Sequence of returns is key.  If you expect to lose money over time, then you must absolutely quit while you are ahead.  Not a sound investment strategy of course... if you expect to lose money making 100 bets I would not even make 1, but then again I do not buy lottery tickets/penny stocks.

If you buy penny stocks you are paying (sometimes a lot) for the chance to take money from some other desperate people.  I would say it is one step up from animal races, but worse than lottery, at least that money goes to something good.

iowajes

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Re: Play money - penny stocks or not
« Reply #12 on: February 12, 2018, 10:07:27 AM »
I'd rather buy penny candy. The return on investment is higher for me.

caffeine

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Re: Play money - penny stocks or not
« Reply #13 on: February 12, 2018, 10:12:42 AM »
I feel better about a lottery ticket than penny stocks. Probably have a better return with the lottery ticket.

Kalergie

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Re: Play money - penny stocks or not
« Reply #14 on: February 12, 2018, 01:33:22 PM »
I really struggle to understand the term "play money". If the money you want to blow on fun stuff suddenly doubles by gambling it on penny stocks/bitcoins/horse races/fine art what ever. Let's say you win. What does it help you if you suddenly have more "play money"? If you didn't care about the cash in the first place, why do you aim to have more of it?

On top of that I think the worst thing that could happen would be to actually win with play money. It may accidentally cause you to believe that you're actually good at this game and this didn't happen because of sheer luck! You may end up betting more than your "play money" because you were so damn good at it the first time.

It's kind of a gate way drug to gambling addiction.

doneby35

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Re: Play money - penny stocks or not
« Reply #15 on: February 12, 2018, 07:47:52 PM »
And therefore all of your comments led me to let go of the "play money" idea... I'll keep adding to my vanguard account as usual. Thanks for setting me straight.

GreenEggs

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Re: Play money - penny stocks or not
« Reply #16 on: February 12, 2018, 08:35:54 PM »
My mom is a penny stock addict.  She's broke from it, but fortunately remarried my father who invested well.

She once owned about 50,000 shares of Priceline for a few months when it was a penny stock. 

She still buys penny stocks with her allowance.... 

aboatguy

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Re: Play money - penny stocks or not
« Reply #17 on: February 13, 2018, 01:16:15 PM »
« Last Edit: February 13, 2018, 01:18:33 PM by aboatguy »

aboatguy

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Re: Play money - penny stocks or not
« Reply #18 on: February 13, 2018, 01:20:43 PM »

aboatguy

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Re: Play money - penny stocks or not
« Reply #19 on: February 13, 2018, 01:23:33 PM »
Oops, it was red!


Mighty-Dollar

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Re: Play money - penny stocks or not
« Reply #20 on: February 13, 2018, 03:18:15 PM »
Let's say you had anywhere between 1k and 5k as play money...

Would you buy penny stocks and risk it all for significant returns?
If yes, which ones would you buy or base your buying decision on?

Or would you rather just add to VTSAX or similar index funds and not gamble with it?
I wouldn't invest in penny stocks under any circumstances. The only people who win are the CEO's getting high paid salaries to run these failing companies. Starting up penny stocks companies is a great way for CEO's to put themselves on guaranteed high paid salary for a few years.
If you want more risk then go with QQQ (the NASDAQ) or XLK (Technology Select Sector SPDR)

Indexer

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Re: Play money - penny stocks or not
« Reply #21 on: February 13, 2018, 05:56:56 PM »
I think crypto currencies are stupid. I've made multiple arguments in the crypto threads about why I think they are stupid.


That said, if I wanted to gamble with $5,000, I would buy cryptos before I would buy penny stocks.

doneby35

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Re: Play money - penny stocks or not
« Reply #22 on: February 13, 2018, 06:06:01 PM »
I think crypto currencies are stupid. I've made multiple arguments in the crypto threads about why I think they are stupid.


That said, if I wanted to gamble with $5,000, I would buy cryptos before I would buy penny stocks.

I bet people who bought bitcoin for a dollar are pretty happy with themselves though.

FiveSigmas

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Re: Play money - penny stocks or not
« Reply #23 on: February 13, 2018, 06:29:59 PM »
I bet people who bought bitcoin for a dollar are pretty happy with themselves though.

I'd MUCH rather build my wealth over time with a well-diversified portfolio than get lucky with a quick score on penny stocks or Bitcoin. The former builds traits that will serve me for life. The latter rewards me for impulsive behavior and increases the craving for the next high -- to my long term detriment.

DB35 are you FI yet (I guess that means are you 35)? If not, YOU DON'T HAVE 5k of "play money."

Edit: grammar.
« Last Edit: February 13, 2018, 06:55:14 PM by FiveSigmas »

alanB

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Re: Play money - penny stocks or not
« Reply #24 on: February 14, 2018, 07:51:10 AM »
I think crypto currencies are stupid. I've made multiple arguments in the crypto threads about why I think they are stupid.


That said, if I wanted to gamble with $5,000, I would buy cryptos before I would buy penny stocks.

I bet people who bought bitcoin for a dollar are pretty happy with themselves though.

I bet people who just shot up heroin are pretty happy too... where are the $1 bitcoin buyers going to get their next score??

trollwithamustache

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Re: Play money - penny stocks or not
« Reply #25 on: February 14, 2018, 08:36:29 AM »
"How to Play Blackjack: Best Beginner's Guide to Learning the Basics of the Blackjack Game! Rules, Odds, Winner Strategies and a Whole Lot More... "

Its only 9 dollars on amazon...

babybug

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Re: Play money - penny stocks or not
« Reply #26 on: February 16, 2018, 07:47:48 PM »
Is a $5 stock a penny stock? How about $0.25? I put $3000 into such stocks  and $500 into actual $.005 to $ .01 stocks.

I know it's dumb but some of the companies are actually selling products, doing patents etc.

I know I should sell asap ( I'm $20% up) but I can't, it's like an addiction, my buddy talked me into it..

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Telecaster

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Re: Play money - penny stocks or not
« Reply #27 on: February 16, 2018, 08:03:26 PM »
I know it's dumb but some of the companies are actually selling products, doing patents etc.

I know I should sell asap ( I'm $20% up) but I can't, it's like an addiction, my buddy talked me into it..

If you know it is dumb...

Strick

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Re: Play money - penny stocks or not
« Reply #28 on: February 17, 2018, 03:06:08 PM »
Sure, why not.  But I agree with the other discussions re: the term "play money".  By play money I am assuming you're already well past FI, or otherwise that is an amount you make/spend in a day, otherwise I argue with your use of the term.  I play blackjack with my play money.

GreenEggs

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Re: Play money - penny stocks or not
« Reply #29 on: February 17, 2018, 05:31:06 PM »
I know that penny stocks can be difficult to unload.  If you have a lot of shares you may drive the prices down as you try to sell them.

PDXTabs

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Re: Play money - penny stocks or not
« Reply #30 on: February 17, 2018, 05:33:51 PM »
It's not what I would spend my play money on, but sure, go for it. I'd rather have a nice coffee, or a dinner with the girlfriend.
When the alien resides with you in your land, you shall not oppress the alien. The alien who resides with you shall be to you as the citizen among you; you shall love the alien as yourself, for you were aliens in the land of Egypt. - Leviticus 19:33-4