2017-06-15 / The Motley Fool

My Dumbest Investment

Risky Business

My dumbest investment was buying into a penny stock. I bought 100 shares for $3.10 each, and I sold them the next day for $1.87 apiece. Today, the stock is worth $0.25 per share. The stock is not one to invest in right now. The company keeps adding more shares all the time.

I learned not to invest in companies without current financial statements available and companies with the letter E added to their ticker symbol. My 401(k) is all in individual stocks and junk bonds.

— M. T. R., online

The Fool Responds: Penny stocks — ones trading for less than about $5 per share — are notoriously volatile and risky. (Junk bonds are risky, too, by the way, which is why they offer higher interest rates to investors.)

When you see a stock trading on the Nasdaq Stock Market or the Over-the- Counter Bulletin Board (OTCBB) with an E added to its ticker symbol, that means it has been late filing required documents with the Securities and Exchange Commission (SEC).

The E is now gone from its ticker, but the stock you bought has been trading near $0.02 per share. The company was once flying high on expectations that it would supply parts to iPhones, but it has posted no profits in recent years. Its share count went from 45 million a decade ago to more than 700 million recently, reflecting much fundraising at the expense of existing shareholders. ¦

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