From getting part-time jobs to starting their own businesses, college students everywhere are seeking ways to boost their bank accounts in order to keep up with the ever increasing cost of school. Students attending any of UC campuses throughout California have undoubtedly been feeling the burden of tuition hikes over the past few years. From the campuses in Southern California like UC San Diego, UCLA and UC Santa Barbara, to Northern California’s Bay Area campuses such as UC San Francisco and UC Berkeley, the latest jump in tuition for the 2011-2012 school year has students scrambling to find ways to earn money.
While not many college students are willing to take a gamble by investing their money into the stock market, there have been some success stories of individuals that happened upon such an opportunity at the right time and right place. Timothy Sykes is one of the most notable success stories. While working towards earning his Bachelor’s Degree in Philosophy from Tulane University, Sykes made the decision to invest his money in penny stocks, which netted him over $1 million dollars.
Hearing about such stories is often enough for some to jump in. However, students should be very cautious when it comes to investing. Regardless of how big or small the investment, there is always some amount of risk involved. Students wanting to follow in Sykes’s path by investing in a penny stock will need to understand how this kind of stock works, as well as the pros and cons associated with such an investment.
A penny stock is one that sets its shares at anywhere from one penny (hence the name) up to $5. Oftentimes, a penny stock is offered by a business that is still small but projected to grow over time. Students will be surprised to know that GM, Playboy, Xerox and Ford were once companies that offered a penny stock.
So what are the pros and cons of making such an investment as a college student? One of the biggest advantages is that even a starving student can afford to purchase a share in a company for between one cent and $5. The second advantage is that as long as the company performs well, the investment will be well worth it—of course if the business explodes into a hugely profitable one that means more money in a student investor’s pockets, as well as the possibility of becoming a millionaire overnight. The downsides include the sad fact that many companies that offer a penny stock turn out to be scams and/or shady operations that take investor’s money in order to make a quick buck. Penny stock investments are also known for being volatile and full of risks, including market risk, equity risk, having low visibility and low tradeability.
Students willing to take the risk should first and foremost research any penny stock company thoroughly to ensure it is a legitimate business. From there, things should fall into place.