About David Anderson Expertise Any question on the intricacies of brokerage accounts and dealing with a brokerage
Experience I spent 25 years writing advertising, marketing and educational material and internal corporate communications for major financial institutions ranging like Chase, Merrill Lynch and Fidelity. During that time, I also wrote for mutual fund families and savings banks across the country. If someone has a question about how a brokerage account works -- from opening one up to the idiosyncracies of their active trader platforms, I can answer it.
Publications All major financial publications and media outlets that running advertising schedules (WSJ, New York Times, Money Magazine, Smart Money, Forbes, Fortune, CNBC, Bloomberg......wherever you could buy an ad or media time.)
Education/Credentials Columbia University School of Business, MBA
Expert: David Anderson Date: 5/15/2006 Subject: Stocks
Question Before I proceed I need to ask if you're knowledgable about penny stocks or have some general input about them?
Answer James --
I know a little bit about penny stocks and, frankly, most of it is not positive. When I was much younger I traded a few and never made a dime. The trouble with these stocks is that trading does not take place in the full light of day. It is difficult to get accurate quotes and the spreads can be enormous. Essentially, you are trading blind in many situations. This is the land of the shark brokers and the "hot tips". The stocks trade for under a dollar, most typically under .25.
So people are more likely to buy thousands of shares of a company (which may or may not exist....it is also often extremely hard to find out any real detail about a penny stock company.) People buy thousands and thousands of shares .....and hope to double or triple their money on the premise of "how hard can it be to go from .01 to .02? Or .05 to .10? Of course the flip side is, how hard is it to go from .01 to .00, and from .05 to .01? The answer is easy, very easy.
If you do want to trade these stocks, you need a brokerage that will give you access to penny stock quotes. Rather than going with a penny stock brokerage, I'd use one of the big boys....that way you have at least the guarantee that the company exists in a form legal enough to fulfill the requirements to be legitimately listed on the OTCBB (Bulletin Board), formerly known as the "pink sheets". (That was the color of the paper penny stock data was printed on once a week by the OTC i think back in the old days. As I'm sure you realize, data that stale made it easy to fleece the unwary -- me, in my twenties.)
Finally, I don't want to be completely negative here. There is a sector of the market where starting as a penny stock is a legitimate, well known path to greatness -- the gold and silver markets. There, many of what are called the "junior mining stocks" started out as penny stocks. These guys are now selling at 12, 13, 14 dollars now. So, if you're going to trade in the pennies, I'd go the area where you have at least a chance of success. Of course, there are as many busts and booms in mining as there are in anything else so you have to do your research. That said, in mining if nowhere else, pennys do pay off sometimes and it is completely respectable for a company to have started there.
Pharma companies....that's another story entirely. If a venture has even the whiff of potential, private equity, etc., would be all over it in a heartbeat and it wouldn't be trading for pennies on the pinks.
Good luck.
