I spent part of Friday night out with friends and we were swapping war stories (you know, guy stuff), when one of them asked me how my business was going.  Now remember, it was a casual time and I was among friends so my guard was down.

“Most people are too greedy”, I said with a smile.

Remember the commercial from years ago, everyone is in a busy place, (bar, office, restaurant) when someone leans over and whispers some stock advice to a friend?  Suddenly the room is so quiet you could hear the proverbial “pin drop”.  The catch phrase was.

“When (I’ll leave out the name of the firm) talks… Everybody listens”.

Well imagine a mini version of that (actually just four guys) and you get the picture.  My friend of course expected me to jump in and start pitching the merits of penny stocks, not to speak of people’s greed, but I wanted to make a point.

When you buy a penny stock (and especially if you belong to a good penny stocks newsletter “hint, hint”) you’ll be given multiple opportunities to “Buy Low” and the idea of course is to “Sell High”, but sometimes greed get in the way of common sense and instead of making money, money is lost and that’s not good for business, mine or yours.

So here’s my advice for everyone considering investing in penny stocks this year… Plan your exit strategy before you buy”.  Sadly stop loss orders can’t be placed on penny stocks so it’s crucial that you have a plan in place.  We’d all like to make one buy that would result in millions, who wouldn’t (think Dell Computer, Yahoo, Microsoft) but those opportunities are few and far between.  However the opportunity to double your money, cash out (sell your position) happens almost every day.

The economy has certainly been spiraling down over the past year, but now its 2009, we have a new president, change is promised, and change will come whether or not it’s exactly as planned.  It’s time for most of us to change the way we look at investing in penny stocks and don’t let greed get in the way.  Invest with your head, not your heart and never chase a losing stock.

All of us want to be on the winning team, and you will be whether or not it’s today, tomorrow or next week will depend on how you manage your money and your investments.

Okay, the guys are getting bored listening to me talk so I’ll leave you with this thought…

Greed may be good… but common sense is better.

Whether or not you choose to include penny stocks as part of your investing strategy is of course up to you, but knowledge is power.  In order to be successful in this economy, open yourself to all the investment possibilities you can.

Penny stocks are certainly more speculative then mutual funds or CDs, but they also offer the serious possibilities of doubling, even tripling your investment in very short order.

The single most important thing to learn can be applied to penny stocks or any other investment… diversify.  Never put all your eggs in one basket, that’s old advice, but as true today as it ever was.

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I’m reminded of the movie… “How to Lose a Guy in 10 Days” with Kate Hudson and Matthew McConaughey, obviously I’m bullish on penny stocks, so what is this article about?  Put simply it’s about having the right mindset to make money with penny stocks.

I’m finishing up an e-book right now called “The Mind Of A Successful Trader”, when it’s done I’ll link it as a free download.  It’s good information and speaks to getting your mind right for anything you want to accomplish in life.  In this case I’m referring to a “Mental Stop Loss Order”.

There are a myriad assortment of people in the world, and this is certainly true in the world of investing…

• The over cautious investor who only invests conservatively with CDs and mutual funds,
• The risk takers, many of these will be day traders, and
• Those who simply sit on the side lines, trusting to the government or (hope, hope) that they’ll win the lottery (good luck).

And of course the truth of the matter is most of us are blend of all three.

So what do I mean by a “Mental Stop Loss Order”?  Since you can’t actually place stop loss orders with penny stocks, it’s necessary going in, (before you buy) to have an exit strategy.  If there really were a “Wall Street Crystal Ball”, life would be great wouldn’t it, but of course there isn’t and we have to use good common sense.

Here’s how it plays out and of course these figures are based on the state of things in early ‘09.

Investing 500 dollars into a CD at 3% will yield $15 at the end of a year.  Maybe a mutual fund will return 10% in a year earning a profit of $50. Investing in a lower price stock that moves 25% in a day will make a profit of $125.

Where people lose their shirts with penny stocks is not in picking the right company (we’ve got that down to an art if not a science), is hanging on too long, hoping they’re part of the next BIG one… My philosophy concerning penny stocks has always been, live to invest another day, stated simply, get in, get out and salt away those profits.

And let me say this, the very reason penny stocks have been lumped with fast talking used car salesman and high priced lawyers, are because of a few high pressure penny stock salesmen who talked trusting investors into “betting the bank” on a particular issue.  Don’t do it, use your head not your emotions when investing.

Am I in favor of penny stocks?  Of course, pennies have allowed me to live the lifestyle I choose, provide for my wife and kids and build a great business, but even I’m diversified.  Am I against mutual funds and CDs, certainly not I have several, but the gains there won’t allow a carefree retirement.

In the movie “How to Lose a Guy in 10 Days”, while both Kate and Matthew set out to “outdo” the other, (in the movie) they both fell in love, so instead of losing a guy (or gal), they became a couple.  In this case, instead of losing your shirt in penny stocks, if you’ll get your mind right, put those “Mental Stop Loss Orders” in place, you can build a beautiful and lasting relationship with pennies, I sure have.

Now then, as to which companies to pick, click the join button below and let me PROVE I know what I’m talking about.