How To Lose Your Shirt With Penny Stocks

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.