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We all gotta start somewhere.. 

 

I'm wondering what's the best approach for someone investing under $1,000. I hear the Penny stocks are pretty popular among us low capital investors but would like opinions from you fine people. Also is it best to invest all into one stock or diversify. The commission prices can add up very quickly when dealing with low capital is why i brought that one up.

 

 

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If I had 1000 i would put it all into BAC once we bottom out of this mess we're in.  Safer than penny, and you could have some decent returns.  Pennys COULD make or break you but you gotta find the right one.  Maybe a Pump and dump and get lucky, haha.

Tommy,

 

I'm in the same position you're in.  I initially invested $1,000 about a month ago into my brokerage account, and just recently deposited another $1K -- $2K total was what I wanted to start out with.

 

I find it hard to choose investments with little starting capital as you mentioned because I don't get many shares with that amount of money.  As a result, it is hard to take positions in more than one stock at a time.  One of the things I've been reading in a book of mine is to make a general rule not to invest more than 2% of your overall portfolio in any one stock.  I definitely don't adhere to this yet, as I've invested 25-50% in a particular stock at times.  I know this is risky and I stand to lose possibly much or all of my money if I make the wrong decision, but it is a risk I am taking at the moment due to such a small starting balance.

 

Also I would like to maybe entertain the thought of playing penny stocks, but I know they can be quite risky and I would prefer to build my bankroll up before I start taking on things that are riskier like that.

 

So far I have executed about a handful of trades -- indeed you are right that commissions can get costly.  It definitely makes you focus in on target entry and exit prices so that you determine where your break-even point is and at what point you will decide to bail if it goes too low, or bail and take profits if it does go up.

 

I'll be interested in sharing some thoughts and stories with you as your trading career progresses.  It's nice to see the perspective from someone in almost the identical situation as myself :) 

I don't really adhere to x % portfolio at a time either but I try to only buy a stock if it's very clear it's in a run and get out quickly if it stalls.  Harder the last couple weeks with the downturn so I've been trading less frequently as a result as well.
FAZ and FAS could be your friend for a while also.

Tommy,

Investing in Penny stock is dangerous but can make you some quick cash. It's not for everyone but it has done ok for me. My (2) rule of thumb are simple:

1) don't be greedy, make your 10-20% and get out and don't worry about how much more it can go up.  Set my account up to sell on LIMIT ORDER.

2) as soon as you make the profit, move it right out of your account and back into your personal account so you don't use your money to invest. The idea is to make the money and continue to re-invest by using the winning money.

 

ALTI

HEV

 

has done well for me recently; however, I would stay away from HEV now

 

 

Well, you could divide the $1,000 into six blocks: four blocks of $200 and two blocks of $100. The first four you can invest in "real" stocks. I would wait until the market corrects some more over the next week, and again retests its bottom (when the SPY is in the 111-112 range). At that point, when other people start buying back in, you could invest in four stocks that are heavily oversold and have been demonstrating strength all year (e.g., GMCR, JAZZ, BIDU, and perhaps AAPL for posterity). In a market like this, you can make as much on "real stocks" as with pennies, if you swing trade them (hold them over multiple days and perhaps weeks). With the two $100 blocks, you might "swing for the fences" on two pennies. Here you have the choice of either picking a "real company" and holding the penny long-term. Alternatively, you might daytrade, gambling and speculating on the price of the penny flying. But you will have to be very careful and get in extremely early (as well as out early) on something in anticipation of news/PR or immediately after this info is released. If you arrive late to the table, your money could be halved. With the pennies, I myself would get in on a company that has been demonstrating some legitimate value, is trending slowly upward for two or three days whereby you can get in at an established support level, and await some positive PR that will make the stock pop. I would not get into a stock that had recently popped and appears to be on a down trend when looking at the 3-month chart -- no matter how much people are talking it up. Note too that some pennies appear to pop every month at a certain time (e.g. ICBT). Others, have crashed almost like "real stocks" and may begin a leg upward again (e.g., PCFG). Even others release very real news in terms of distribution deals and move every once in a while (e.g. JAMN). And there are those that are dealing with bankruptcy settlements and related news items, and find support for good 20% thrusts (e.g., WAMUQ). But do not take my or anyone else's word for it; do your homework. Figure out your approach and then try to stick to it. This last bit is the hardest part.

i am not too sure if you can break it down this way, as it will require the stock to go up 7% (using scottrade when the fee is $7) before you can break even for your $200 investment and of course it needs to go up 14% for your $100 investment. 

 

i do agree for looking at companies that have demonstrated strength all year.

Yeah I'd agree w/ Fris.  I'd be more cautious of trying to hold too long to stretch for those gains.  I'd much prefer just making more consistent trades with smaller %s in this market.
Right. It definitely depends on the fee structure. I suppose it also depends on whether Tommy wants to learn by diversifying etc. or whether he wants to try to place all his money on "black" so to speak. The middle ground might be, say, three clumps of $333. Two in real stocks and one in pennies, or the reverse. Note too that, for instance, a 10% fee might not be the end of the world if you are able to diversify, while targeting a %40 yield on a penny that has a history of popping that high. That is, there is no right way of doing this. I generally invest in blocks over $1,000 so I never worry about the $7 fee.

Most of these replies will get you in the gutter.  When you buy a penny stock, unless it is being pumped it is sure to go down. Do not try to day trade, you will lose 20% in a day or two, the next day you will want to get back faster so you will pick a riskier stock and lose another 30% in one day,  now when you're down 50% you need to make 100% just to break even. Same with fas and faz, they are losers in the long run.

 

Your best bet for $1000 is either A: massive research and find something undervalued that has good potential and little risk because they have enough cash, or B:  multi month deal with a slow mover that might pick you up 40% over the next few months.

Keep it, save more and then invest. To be 100% honest, the market moves like an airplane hitting very bad turbulence, if you don't have enough capital to fly high enough you will hit the trees almost immediately.

I'm not saying this to be mean at all or a jerk. I'm just bring 100% practical and realistic.
hope this thread has helped 
*being

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