ASK THE FOOL
Beware of Penny Stocks
Q: I’m interested in investing in stocks that cost less than a dollar each. Do you recommend any?
– H.C., Pueblo, Colorado A: Nope. You’re referring to “penny stocks,” which trade for less than about $5 per share. If you have only, say, $500 with which to invest, it might seem smart to grab 2,500 shares of a stock trading for $0.20 per share, but it’s not. Penny stocks are notoriously volatile and are often tied to small and shaky companies without proven track records. They’re often hyped online and are easily manipulated by shady characters.
Understand that with just $500, you might buy 10 shares of a $50 stock or one share of a $500 stock. Many brokerages let you buy fractional shares, so you might even buy half a share of a $1,000 stock. Plenty of $500 stocks are on their way to $1,000 or more, while plenty of $0.20 stocks are on their way to $0.10 or less. Never focus solely on a stock’s price – focus on the business and its growth prospects.
FOOL’S SCHOOL
Debit Cards vs. Credit Cards
Credit cards are preferable to debit cards in many ways, but learn the pros and cons of each before deciding what’s best for you.
With a credit card, you’re essentially drawing on a line of credit from your card’s issuer, and you’re expected to pay off your debt each month. If you don’t, you’ll be charged interest. A debit card, on the other hand, draws directly from your bank account, as if you were writing a check. There’s no borrowing involved.
An advantage of debit cards is that they don’t let you rack up debt. You can’t buy what you can’t afford. That means you also don’t receive a bill every month that needs to be paid off. Debit cards also generally don’t charge annual fees – while many credit cards do.
Credit cards, meanwhile, offer many benefits. For starters, using a credit card responsibly – that is, paying your bills in full and on time – is a good way to build a high credit score, which can help you get better interest rates when borrowing money. (On the flip side, though, applying for too many cards or racking up debt can depress that credit score.)
Many credit cards offer perks such as a percentage of your purchase price back in cash or the ability to earn points toward discounts. Travel credit cards can offer access to airport lounges, upgrades for hotels and flights, and dining credits at restaurants.
Some credit cards offer purchase protections and extended warranties, too.
FOOLISH TRIVIA Name That Company
I trace my roots back to 1996, when Microsoft launched me as one of the first major online travel agencies. In 2003, I was fully acquired by Interactivecorp, which also bought Tripadvisor and other companies. It spun me off with its travel-related businesses in 2005, and I spun off Tripadvisor in 2011. Today, based in Seattle and with a recent market value near $24 billion, I encompass many brands, including Carrentals.com, Cheaptickets, ebookers, Hotels.com, Hotwire, Orbitz, Travelocity, trivago, Vrbo and Wotif. I’m now one of the largest online travel agencies in the world. Who am I?
Last Week’s Trivia Answer
I trace my roots back to the 1940 founding of an oil and refining company. Today, based in Wichita, Kansas, I’m one of the world’s largest privately held companies, with around $115 billion in annual revenue. My operations range from ranching to data analytics, and my businesses include Flint Hills Resources, INVISTA, KBX, Matador Cattle Company, Molex, Infor, Guardian Industries and Georgia-pacific – with brands Angel Soft, Brawny, Dixie, Quilted Northern, Sparkle and Vanity Fair. I boast more than 120,000 workers in more than 70 countries, with about half in the U.S. Who am I? (Answer: Koch Industries)