The future looked amazingly bright for TrimFast Group, an Edgewater, N.J., company that said it supplied prepaid debit cards, long-distance phone cards and prepaid legal services. Or so one would have gathered from its publicity, much of which came in mass e-mailings last June. But if you responded by buying TrimFast's stock, your portfolio almost certainly would have suffered a fast trimming. At 2.1 cents in mid November, the stock was down 86% since the e-mail blast.
Investing in penny stocks has always been super-risky. Now comes evidence that low-priced stocks that are publicized in mass e-mailings are just as dangerous to your wealth. Bombarded with penny-stock spam, Joshua Cyr, a 31-year-old software developer in Portsmouth, N.H., decided to see how the shares actually performed. So with a universe of 37 stocks that were touted in e-mails between May 5, 2005, and June 27, 2005, he started a hypothetical portfolio. Says Cyr: "I figured I'd see what would happen if the average Joe, who doesn't know much about what these stocks are, were to actually invest in them."
The results are dramatic. As of mid November, the portfolio was down 52%. Sixteen of the stocks were down 75% or more (one appears worthless). Only six rose. During this period, incidentally, the small-company Russell 2000 index climbed 12%.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
As for TrimFast, its Web site is no longer operational, and the phone number shown in its most recent Securities and Exchange Commission filing has been disconnected.
--Dan O'Connell
-
What Is a Qualified Charitable Distribution (QCD)?Tax Breaks A QCD can lower your tax bill while meeting your charitable giving goals in retirement. Here’s how.
-
Embracing Generative AI for Financial SuccessGenerative AI has the potential to reshape how we approach learning about and managing our personal finances.
-
Best Banks for High-Net-Worth Clients 2024wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2024 and 2025: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024 and 2025.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
Kim Kardashian's $1.3 Million Crypto Fine Is a Warning to InvestorsKim Kardashian didn't tell her instagram audience she was paid to promote a crypto token. Now, she'll pay a hefty fine.
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
