I started my trading journey in 1994 with UK penny shares (*1). The thought of a share price going from a few pence to many pounds was enticing as I calculated my expected rate of return in the thousands of percent.
I scoured the share listings in my parents newspaper to find those quoted for less than 10p. Then seeing a price change from 2p to 4p overnight was exciting. I had thoughts of grandeur, doubling my money every few weeks.
How do I buy these?
How much money do I need?
How do I sell them?
The answers are easy to find now but in 1994 they were not.
I somehow managed to find a broker (the name of which I have long since forgotten). I chose them because I could send my share purchase instructions to them by fax. I had to make a trip to the local petrol station as that was the nearest fax machine to me. Then a few weeks later I would receive my share certificate in the post.
In those early years I purchased more penny shares in a few different companies. I can only remember the names of Fortune Oil and Sutcliffe Speakman. I have just searched for them and they both appear to still be trading.
Needless to say none of those shares generated the return I was hoping for and indeed they did not generate any return at all.
Lessons learnt (but not immediately)
- Penny shares tend to be illiquid (*2)
- The Bid/Ask spread for penny shares is wide (as a percentage)
- They are cheap for a reason
*1 A penny share is defined as a share that sells for less than £1/$1.
*2 A share that has very little trading activity
