Nope, you won¡¯t find Yosemite Sam trading his stock on the NYSE, the NASDAQ, or the AMEX. Those areas are pretty much confined to Money Managers within large institutions; the people that handle our State Pension Funds, IRAs or Roth accounts. And Yosemite is not in the same league as Buffet, Soros, and Kerkorian; he doesn¡¯t have millions and billions of dollars.
Yosemite is what he is; a spirited, quick-tempered character; he¡¯s a cowboy; but he¡¯s not just any cowpoke. He happens to be ¡°the hootenist, tootenist, shootenist, bob-tailed wildcat in the west . . . .¡±
Where is Yosemite Sam? Down in the penny stocks; where it¡¯s wild and rowdy; full of saloons and spittoons. It¡¯s a place where the stagecoach brings news of the latest and greatest start-up company; the one that Yosemite hopes will make him a millionaire. His investment could push a small start-up company from a seed, to a seedling, and then to a full grown tree. Think of Yosemite Sam as a beneficial microbe in the soil and you¡¯ll get the idea.
Yes, Yosemite likes penny stocks. The risk is high, but if he uses his research skills (due diligence), there¡¯s potential for big rewards. Now let¡¯s take a look at how things work in penny land.
What is a penny stock? The definition is all over the map. The SEC classifies a penny stock according to its share price -- under $5.00; others label any stock under $1 to be a penny stock; then there¡¯s the other classification: penny stocks trade on the OTC and Pink Sheets.
Personally, I consider the third definition to be closer to the truth. While a few penny stocks are indeed traded on the AMEX and the NASDAQ, most penny stocks are way down in the microbial world; they are like itty-bitty seeds. Since they are so small, they mostly go unnoticed by the institutional investment community. These big, lumbering behemoths are just not interested in the micro environment.
This small world can benefit Yosemite Sam. He can take advantage of its dynamics; he¡¯ll become familiar with a company, as he looks for the two most important factors that could produce a nice return: A) a good product or service, and B) exceptional management. Of course, there¡¯s more information that needs to be gathered, but basically this area is where Yosemite Sam begins as an independent investor.
Penny land is not for the faint hearted; it can be a roller-coaster, even for Yosemite. It¡¯s a world where rumors run wild; deception is rampant, and the small investor can be taken for a ride. To be successful in this market you have to be aware of both the risk and the environment you are in. Yosemite has to take the bitter with the sweet. After all, this is risky business.
The best part of penny stock investing is the enormous learning that takes place; to learn how to swim, is to swim; to learn how to run, is to run; to learn how to invest, is to invest; and what better place than in the micro stock world. Here¡¯s an example of what Yosemite might do with that $500 he¡¯s got stuffed in a boot or under that gigantic hat:
• He could invest in ABC stock which costs $5.00 per share and trades on the NASDAQ. That would give him 100 shares. Or, he could take that $500 and invest in XYZ penny stock which has a price of $.01 per share, which would give him 50,000 shares.
• Now if ABC stock goes up to $5.50 per share (which is a pretty hefty increase, by the way) Yosemite would make $50.00.
• But if his XYZ penny stock increases by just one additional penny, to $.02, he¡¯ll double his money. Yosemite now has $1000.00 for his $500 investment.
• But wait. What happens if he gets really interested in the company and collects more positive data? What if that $.0l turns into a nickel? Well, Yosemite¡¯s investment would grow from $500 to a gain of $2,500. This is much better than $50.00 from ABC stock.
• Then of course, Yosemite could lose half or all of his $500. But that¡¯s the nature of the beast. Or as Yosemite might say, ¡°Sometimes you get, and sometimes you get got.¡± If he studies, learns, and becomes familiar with this market the odds are much more in his favor.
Yes, Yosemite might get rich quick, but he¡¯s also aware that penny stocks are basically an investment in potential. It takes time to bring a product or service to market. The hidden benefit is the opportunity for learning; how to become an independent investor.
Yosemite Sam can wait; after all, he¡¯s a real buckaroo; ¡°Oooooh -- Great Horny Toads.¡±
Nancy Ayash is a freelance writer currently residing in the Pacific Northwest. http://www.creativewordz.com
Article Source: http://EzineArticles.com/?expert=Nancy_Ayash
http://EzineArticles.com/?Why-Yosemite-Sam-Likes-Penny-Stocks&id=533748
Save This Page