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Investment Advice on Penny Stocks
Motley Fool CEO Tom Gardner advises new investors against buying penny stocks, recommending they avoid stocks priced below $10 during their first three years of investing. Gardner emphasizes that while some low-cost companies may perform well, their low price often indicates underlying business issues. He argues that experienced investors would have identified any real value in these stocks.
Gardner highlights two primary risks associated with penny stocks: they are often either long shots—companies lacking revenue and relying on fundraising—or failing companies caught in a downward spiral. He believes enforcing a no-penny-stock rule for new investors could save significant capital losses across the investment landscape.
Additionally, current recommendations include a list of the “10 best stocks” to buy, suggesting informed choices in place of penny stock investments. According to their analysis, the Stock Advisor has yielded an average return of 1,053% compared to 179% for the S&P 500 as of July 7, 2025.
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