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Penny Stock Mutual Funds - Love Or Hate?


Penny stock mutual funds are growing in popularity. And for some investors they might be the right move. Frankly I hate them, and here’s why… – PowerPoint PPT presentation

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Title: Penny Stock Mutual Funds - Love Or Hate?

Penny Stock Research The Truth About Penny Stocks
  • Welcome to Penny Stocks Research. Every day we
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    For more information on penny stocks please visit
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  • Hi, My name is Aaron and Im with Penny Stock
    Research, today were reviewing our recently
    published article

Penny Stock Mutual Funds - Love Or Hate?
Do You Hate Penny Stock Mutual Funds? You
Should. Heres Why
Welcome back everyone. I hope you had the
opportunity to enjoy the beautiful Memorial Day
Weekend. I took the family up north to the
cabin. Flagstaff, Arizona is a wonderful
retreat, away from the heat of the desert.
Clean air, the fresh smell of the pines, and cool
weather it doesnt get much better. The dogs
loved hiking the trails and the horses were full
of enthusiasm!
But now, were back to work today and today Im
going to cover something very important. Im
going to share with you why Penny Stock Mutual
Funds are a bust in my mind.
It doesnt take a rocket scientist to see the
problems but these funds still manage to gather
hundreds of millions of dollars from investors.
Its mind boggling. But before we get there, some
important news
Russell Indexes Rebalance In 3 days Watch Out!
Thats right. The famous Russell family of stock
indexes rebalances their holdings at the end of
May so you probably want to sidestep trading for
a few days.
As many of you know, Russell indexes are widely
tracked by Wall Street and a number of ETFs have
popped up following these indexes very
closely. The problem is there are a number of
stocks on the bubble.
See, Russell chunks their indexes by number of
companies For example the penny stock index we
follow is the Russell 2000 Small Cap Index RUT.
The Russell Funds take the top 3000 stocks in the
market and then they rip out the BOTTOM 2,000
stocks to make up the Russell 2,000.
As you probably guessed, theres a lot more than
3,000 stocks trading on the markets so where
they draw the line is critical.
Ive heard rumors of fund managers buying some
stocks and shorting others to make sure some
their favorite portfolio stocks make the cut
Barrons recently noted When a change to a
widely followed stock index is announced, traders
can step in to buy shares before they enter the
benchmark, driving up the price. .
some funds have the potential to spur
exaggerated, if temporary, price swings in some
illiquid stocks. As you can imagine, theres a
lot of money on the line. And on Wall Street
that causes ethics go out the window! So trade
The Good - Penny Stock Mutual Funds
Penny stock mutual funds are very popular right
now and despite my aggressive headline for this
article, in some cases penny stock mutual funds
have their place.
For example if youre not a penny stock trader,
dont watch the stock market, dont do any
research, and generally follow the advice of
others then Penny Stock Mutual Funds are
probably good for you.
Theyre an easy way to get into a lot of microcap
stocks they provide extensive diversification.
So, if thats you take a look at adding some of
these small cap mutual funds to a part of your
portfolio. Please, please, please dont invest
your life savings in these mutual funds.
Heres a few you might look at AllianzGI Ultra
Microcap Fund AUMIX Royce Micro-Cap Fund
RYOTX Wasatch Micro Cap Fund WMICX
T. Rowe Price Small-Cap Value Mutual Fund
PRSVX Bridgeway Ultra-Small Company Market
BRSIX There are a bunch of others, but thats
the start of a good list of penny stock mutual
Now personally, I think these Penny Stock Mutual
funds are the devil. Seriously, heres why
I Hate Penny Stock Mutual Funds And You Should
Alright, Im pulling the gloves off. I hate penny
stock mutual funds and heres why. One They are
too diversified. Two You can do better on your
own, and Three They charge ridiculous fees!
Lets look at these three problems one at a
time. First the diversification issue. Ill be
the first to tell you a properly diversified
portfolio is a must especially for trading penny
But the safety diversification gives you also
kills your upside potential. Heres an example
If you own 10 penny stocks with 10 of your
portfolio in each investment youre taking on
some risk, but youre also positioned to capture
big upside.
If one of those penny stocks jumps 1,000 (which
does happen) youve just DOUBLED the size of your
portfolio! Do the math. Youll see what I mean.
But take one of these penny stock mutual funds
theyre too diversified. The Royce fund holds
196 different stocks. The largest holding is
1.5 of the portfolio.
If that one stock the one they own the most of
jumps 1,000... the entire fund gains a paltry
15. That is if the other stocks dont drag down
the performance! What youre doing is trading
away the potential for huge, life changing gains
for the safety of diversification.
If thats not bad enough, we come to problem 2
you can do it better yourself. I honestly believe
the average investor can out manage and out pick
every mutual fund on the planet. You know why?
Because its your money and nobody cares for it
more than you will.
Consider this in the last 10 years the Wasatch
Micro Cap fund has shown annual returns of
7.3... not bad. Until you look at the Russell
2000. That unmanaged index has returned 9.18.
Of course they dont say if thats BEFORE or
after expenses but either way, does it
matter? Why pay someone who cant beat the
averages. Oh, by the way, most mutual fund
managers dont beat their benchmarks.
Speaking of expenses this brings us to my major
objection number 3. You know I saved the best
for last. The expenses charged by penny stock
mutual funds are ridiculous.
AllianzGI Ultra Microcap Fund AUMIX charges 2
EVERY YEAR Royce Micro-Cap Fund RYOTX
charges 1.52 EVERY YEAR Wasatch Micro Cap
Fund WMICX charges 1.9 EVERY YEAR!
T. Rowe Price Small-Cap Value Mutual Fund
PRSVX charges 0.96 EVERY YEAR! Bridgeway
Ultra-Small Company Market BRSIX charges 0.72
Look, if youre making money hand over fist, good
for you you can probably afford to give away 1
or 2 of your PORTFOLIO every year. Not me. I
prefer to trade my own penny stocks using a cheap
online broker and save myself the crazy fees.
If thats not enough to make you hate penny stock
mutual funds I dont know what is. Now before we
go, I want to share an insider piece of advice
easily worth 1,000 bucks
My 1,000 Insider Tip On Penny Stock Mutual Funds
Are you ready Write this down. If you like the
idea of someone else doing research for you, you
can always find out what these funds are
investing in!
YES you can legally STEAL their investment
ideas. How? Scoot on over to the SEC.GOV website
and type in the name of the fund then take a
look at their quarterly and annual reports.
Inside of these reports is a list of every
investment they own. Why not take that list of
several hundred penny stocks and cherry pick the
best ones. You can do your own research, find
your own hot penny stocks and own the cream of
the crop!
Its a LEGAL way to steal all their hard work
and you dont have to pay the ridiculous fees
they charge.
Oh and dont forget I publish a newsletter
exposing some of the hottest penny stocks I can
find. Its how I pay the bills and believe me I
dont charge anywhere near the 2 some of these
crazy penny stock mutual funds charge.
If youre interested take a look at my Penny
Stock All Stars service. Good investing.
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