The Case For Juniors

By Clive Maund, GoldSeek

This article has been provoked by a reader who told me he wasn’t interested in my site because it is weighted towards “penny stocks” which he considers as “being suitable only for gamblers”. The purpose of this article is to sweep away misconceptions and to make crystal clear the enormous advantage of intelligent penny stock investing over normal “respectable” investing in higher priced stocks.

In the first place investing or speculating in the stockmarket is an opportunity cost game, the objective of which is, or should be, to make the biggest gains possible in the shortest space of time. From this simple truth it is obvious that an investor who buys the stock of a large well established company has generally already goofed up big time. He is already a “bagholder” arriving late at the party who is paying a high price for something that may have been a 20 cent stock a few years ago. This kind of investor thinks that he is doing well if he makes a 30% gain in a year. 30% is NOTHING compared to what he could have made elsewhere. So why do most investors insist on shooting themselves in the foot by buying such mediocre investments? Essentially there are 2 reasons. One is fear – while most buyers of stocks are goaded on by the prospect of capital gains they are also terrified at the prospect of losing their capital, and are therefore inclined to invest in larger established companies because they figure they have much less chance of going bust, also they feel more comfortable being part of the crowd investing in these companies – the old safety in numbers thing.

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