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How’s it going everybody. this is beat the bush today, i’m going to talk about why you should generally not invest in penny stocks. before translate some of my videos that were helping a lot of other people and in turn you can submit this translation to me and i can approve it and it would get attached to the video itself of course and you’ll know that you helped someone if
You contribute their translations to a video that actually helps a lot of people you can help a lot of other people in a different language as well i’ll leave a link down in the video description below to let you know how you can get started now before and i did this long long time ago back in high school when i was just starting out investing what i notice is that when i
Was first doing. i didn’t know what i was doing. i just go oh penny stocks they appear really cheap and so i can afford to buy into it every single day and this made me think that i was actually investing because i was doing my research on it however what i did not realize that the overall trend of the price increase or decreases was basically out of my control and this was
Basically just gambling for me if you believe me to some extent you can also check this for yourself just decide if the price was going to increase or decrease for the next day now write this down the day before that you think it’s going to go up or down the next day and then you track what your prediction is and most likely the longer you track it the longer it’s going to
Converge towards 50% because basically it’s going to be a toss up and you really have no control over if it’s going to go higher or lower sometimes if you do not have enough data points maybe you would have a little bit higher than 50% of correct guesses a little bit less than 50% of incorrect guesses if the market is continuously going up and it’s bringing all the prices
Of all the stock prices up then you might have a higher chance of getting more correct in a row do you note that over the long term and if you plan to invest in penny stocks over the long term you’re going to converge? towards basically 50% if somehow in the long term if you’re able to get the stock price better than 50% of the time that means that you know something about
The company that other people do not and maybe you have some insight about the company going to go up much higher later on since you’re starting from a penny stock you think maybe oh in the future stock in the future then if you’re right about this due to your insight then yeah maybe you should be investing in a penny stock but for the general case for 99% of the investors
You’re not going to have enough clarity into the stock in order to invest it in to make money if you read any of the warren buffett newsletters he’s also not a big fan of penny stock for the very same reasons i’m outlining in this video for one penny stock is not as highly regulated as big cap stocks this leads to a situation where some information could be not as transparent?
To the typical investor that’s outside the company you can see that for a small company there might be rumors or something that sometimes people might know privileged information is much sooner than the typical investor this uneven distribution of information leads to a situation where some investors would have a leg up on other investors which leads to unfairness and leads
To a typical investor not invested in the company in a fair market now if you’re an insider to the company and you somehow use some privileged information to get monetary gains on the open market this is called insider trading but you can imagine that this piece of secret information might just get easily used and no one would actually know about it so this happens a lot and
This kind of opaqueness in information that you get from a penny stock. it’s a very reason why i stay completely away from them because of this unfair practice and noting that every single penny stock company will actually do this or the people involved will actually do this but it’s just a structure of a penny stock and the whole thickness of the information that causes me
Not to invest in a penny stock for example if you have a penny stock company and there’s a group of people and maybe there’d be some privileged people and somehow they overheard someone else about some merger or something or maybe they’re gonna get like really good business from some company and they know it’s going through well. this is a situation right for exploitation
And you as an investor has no control over. maybe they’re not even directly related to the company maybe they just overheard it at a coffee shop or something and they go and buy the stock ahead of the announcement then you can see how this can be unfair and there’s a lot of situations like this where transfer information is kind of hard to track and this is a very reason why?
Investing in a penny stock is sort of dangerous, and you’re at a disadvantage if you are a complete outsider and you’re looking at a company from outside and only getting news articles because by the time the news article comes out that information is somewhat stale already now before you invest in penny stocks you gotta realize that there are so many different investments that
You can partake in for example you can do p2p lending you can do cryptocurrency as i just talked about you can invest in large middle to large cap stocks you there’s just almost an infinite number of places where you can put your money and they all have a different risk and a different reward the point here is that there’s always going to be different kinds of investments
That seem really really good the great thing about it is if you have money to invest you do not have to pull the trigger on every single investment that seems like a good deal you can just wait until the risk versus reward profile is high enough, or that the you’re buying into is a really really good value in other words if you hold the money you have infinite options
Once you deploy that money and bought into something you do not have options until the point at which you sell this is a powerful point and it alludes to when people say cash is king cash really is king because when you have cash you are allowed to do whatever you please with it the cash monetary value investments that you want don’t forget to give me a like on this video
Comment down below let me know what your views on penny stocks i know some commenters out there have shown a great interest for penny stock they say oh yeah invest in this or invest in that perhaps that’s your spam, but let me know what you think about the nice talks yourself if you’re interested in supporting this channel don’t forget to check out my audible link down in
The video description below in fact you can check out the book the intelligent investor by benjamin graham, which is also warren buffett’s favorite book it teaches you the basics of intelligent investing if you end up not liking the book you can actually cancel the subscription and not only think you can still keep the audiobook and you can still help in if at this channel
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Transcribed from video
Why not Penny Stocks | BeatTheBush By BeatTheBush
