Look at penny stocks as you would look at shopping – for the sale prices.
When I was in elementary school we use to get excited when our teacher brought out the overhead projector…and moved blocks of wood around to teach us math. What could possibly compete with images projected on the blackboard? That was mathematical teaching…and learning at its zenith.
Not surprisingly, times have changed.
In a bid to help enliven core academic subjects, students from fourth grade up to college, can, if their teacher is up for it, participate in something called “The Stock Market Game”.
The Stock Market Game is a curriculum-based teaching tool that allows students to paper trade $100,000 in an online stock portfolio to learn about long-term saving and investing. Naturally they compete with other schools across each state.
And, just like real life, some people lose everything, while others beat the market. Some invest wisely, others get really lucky.
By a stroke of luck…or sheer genius, one Indiana team "bought" Bear Stearns (NYSE: BSC, Bullboard) stock at $5.60 per share earlier this semester in the imaginary stock market game. Shortly afterward, the stock soared to nearly $11 per share when Bear Stearns and JPMorgan Chase & Co. (NYSE: JPM, Bullboard) merged in March.
"Being a loser made them a winner," said Greg Valentine, Director for the Center for Economic Education at the University of Southern Indiana.
When it comes to making money on the stock market, I’ll take lucky any time. I have no problem being right for the wrong reason. Yes, I’d sooner make money because I picked the right stock for the right reason. But that doesn't always happen.
Whether you’re trading real or imaginary money, the stock market is a paper game. While many believe that this game was created only for the very wealthy, what they fail to realize is that many of those millionaires obtained most of their wealth in the stock market – before they were millionaires.
And I’m sure there are a large number of stock market millionaires that cut their teeth with penny stocks. Frankly, whether you’re a grade four paper trader, love penny stocks or large-cap stocks, the same fundamentals to picking winning stocks still apply.
In discussing his own investing philosophy, Warren Buffet commented recently, “…there's no reason to get excited whether some analyst is recommending it or the company is splitting the shares two-for-one, or whatever.”
He went on further to say, “You should be able to write down on a yellow sheet of paper, 'I'm buying General Motors at $22, and GM has 566 million shares for a total market value of $13 billion, and GM is worth a lot more than $13 billion because ________." And if you can't finish that sentence, then you don't buy the stock.”
That way, when you buy your new favorite penny stock, you’ll have confidence in your decision. And it’s always easier to be an investor than speculator.
What to do if your penny stock drops in price? Buy more. Try looking at penny stocks the same way you would if you were shopping. Look for the sale prices.
If you’re confident in your penny stock when it’s up, you should be confident in it if it falls. Falling prices create the opportunity to buy even more of something that was already worth owning. And there are a lot of excellent penny stocks trading at bargain prices right now.
