Penny Stocks: The Worst Investment You Can Make

Due to the magnitude of the recent bear market, we’ve been able to buy a lot of fine companies for less than $10 a share. Many of them are already trading considerably higher.

Yet some readers want us to go all the way down to the cellar. “Why don’t you ever recommend penny stocks?” one subscriber asked. “After all, it’s easier for a 50 cent stock to go to $1 than for a $50 stock to go to $100.”

For starters, it’s not.

Over the years, dozens of studies have shown that lower priced stocks don’t do better than higher priced stocks. In fact, they do considerably worse.

Ironically, while it’s not easy for a 50 cent stock to go to $1, history shows that going from 50 cents to zero is like falling off a log.

There are other reasons I won’t touch penny stocks with a barge pole: