Blog : The 20% Excitement Expense

January 18th, 2007

I'll tell you the most important thing in penny stocks - take it slow. Read my book (pennystocks.org), follow the penny stocks you are interested in for weeks or months, paper trade for a long time... then you will know when you are ready, and you'll know a good trade when you see one.

Most people start out like I did. They get excited, put all their money into one or two stocks right away, and if they start losing their investment dollars, only then do they take the time to learn what they should have in the first place.

I remember that I used to get pretty excited, and very impatient when I felt like I had found a winner. I would rush to enter my order, as if that penny stock was about to pop in price in a matter of minutes. I felt sure that the whole investment world was going to suddenly discover this hidden gem, and that I had better get involved before they did.

Only after I had snatched up the penny stocks' shares did I breath a sigh of relief. Of course, once I bought, not much happened. The price barely changed for many days. It turned out that I didn't need to rush so much.

In fact, looking back to all the penny stocks I had bought earlier in my investing career, I noticed a pattern. The more excited I was about a penny stock, the more likely it was to fall victim to what I call the 20% excitement expense. That excitement expense, simply put, meant that whatever shares I had bought, I could have got them a few weeks later for 20% cheaper.

I suppose there is a correlation that suggests penny stocks that get investors excited may have a price premium built into the share price. It also pays to take it slow, and be patient enough for the price to come down to you.

If you do miss out on a big opportunity, just remember that there are plenty of other excellent penny stocks waiting in the wings.

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Blog : The 20% Excitement Expense