And not the stocks.
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Expensive lesson from investing in penny stocks 10 min
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->The article 'Beware of penny stocks' (July27) by Ms Jessica Cheam was a refreshing read. It struck a chord with me who, like many investors, had a brush with penny stocks during the best of the bull and the worst of the bear runs.
When the bulls came charging two years ago, it sparked a behemoth revival for penny stocks, some of which literally woke from the dead. Stocks with seemingly poor fundamentals turned from zero to hero as investors rushed to pick up undervalued penny stocks which were potential big winners.
Suddenly, everyone became a stock expert, from the office cleaning lady to the taxi driver uncle who were able to rattle off stock recommendations from which they made a killing.
Fast forward two years later, when the local market was hit by the sub-prime crisis and rising oil prices. Stocks tumbled as spectacularly as the manner in which they had risen, as a slew of bad news hit home.
If one were to analyse the current prices of the penny stocks against the highs during the bull run, many of them must have lost at least half or more of their value.
I realised that even seasoned investors who had experienced previous super bull runs and stock market crashes tend to make the same mistakes again. Many may have made massive gains during the bull run. However, complacency and over-confidence led some to over-invest.
When sentiments suddenly turned bearish, they were unwilling to cut their losses. Till the stocks drop to a level at which the losses are too heavy to bear, they can only bite their lips in agony and hope for a rebound.
I also learnt that doing your homework to identify undervalued stocks with good fundamentals may not be feasible in a bear market. There are many penny stocks out there with sound business structure, low price-earnings ratios and huge cash coffers, yet they are bashed mercilessly by the bearish sentiments.
As the old market saying goes, 'the bulls climb the stairs but the bears jump out the window'. How true. Many investors have paid a hefty tuition fee during this crisis. It was a good wake-up call and learning experience which I hope will make me a better and wiser investor in the future. Ben Yeong
<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Expensive lesson from investing in penny stocks 10 min
</TR><!-- headline one : end --><!-- show image if available --></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->The article 'Beware of penny stocks' (July27) by Ms Jessica Cheam was a refreshing read. It struck a chord with me who, like many investors, had a brush with penny stocks during the best of the bull and the worst of the bear runs.
When the bulls came charging two years ago, it sparked a behemoth revival for penny stocks, some of which literally woke from the dead. Stocks with seemingly poor fundamentals turned from zero to hero as investors rushed to pick up undervalued penny stocks which were potential big winners.
Suddenly, everyone became a stock expert, from the office cleaning lady to the taxi driver uncle who were able to rattle off stock recommendations from which they made a killing.
Fast forward two years later, when the local market was hit by the sub-prime crisis and rising oil prices. Stocks tumbled as spectacularly as the manner in which they had risen, as a slew of bad news hit home.
If one were to analyse the current prices of the penny stocks against the highs during the bull run, many of them must have lost at least half or more of their value.
I realised that even seasoned investors who had experienced previous super bull runs and stock market crashes tend to make the same mistakes again. Many may have made massive gains during the bull run. However, complacency and over-confidence led some to over-invest.
When sentiments suddenly turned bearish, they were unwilling to cut their losses. Till the stocks drop to a level at which the losses are too heavy to bear, they can only bite their lips in agony and hope for a rebound.
I also learnt that doing your homework to identify undervalued stocks with good fundamentals may not be feasible in a bear market. There are many penny stocks out there with sound business structure, low price-earnings ratios and huge cash coffers, yet they are bashed mercilessly by the bearish sentiments.
As the old market saying goes, 'the bulls climb the stairs but the bears jump out the window'. How true. Many investors have paid a hefty tuition fee during this crisis. It was a good wake-up call and learning experience which I hope will make me a better and wiser investor in the future. Ben Yeong
