Ask Paul: Can I invest in penny dreadfuls as a hobby?


Dear Paul,

My husband died recently and although I have a sufficiently busy life, there are times when I have had enough of gardening, voluntary work and such, and am looking for another interest to occupy the time I would normally spend with my husband.

I thought playing the stockmarket in a small way, say starting at $500, might be fun and interesting. 

ask paul clitheroe can i invest in penny dreadful stocks as a hobby

However, I am not sure how to go about this. 

I have a portfolio of shares that my stockbroker keeps an eye on, but I mean to deal in what I think is termed 'penny dreadfuls'.

I wonder what your thoughts are concerning this venture. - Clare

My commiserations on the loss of your husband, Clare.

On a lighter note, you are doing what most people do after the death of their partner - gardening, voluntary work and so on - but in about 40 years of answering money questions, I do have to say that you are the first person to tell me they are going to have a crack at trading 'penny dreadfuls'.

In fact, I am still smiling.

This is a really fun idea. I've had a crack at some smaller, speculative shares over the decades and it has been fun, but generally I have managed to lose my money.

The research, reading, buying and selling these type of shares is interesting, though, and can be a good hobby. You mention $500 and this is a sensible amount.

The trick with speculative investing is to expect to lose 100%, and generally people do! But a lot of these small companies are doing very stimulating things and I know you will enjoy the research process.

Low buying and selling fees will be a key issue.

I see Commsec has a 'free first 10 trades' offer on new accounts and Superhero is offering $5 trades, but finding a low-cost broker will be the start of your research.

I doubt $500 will make any difference to your lifestyle, so go for it!

All I would suggest is that you do not let enthusiasm for your new hobby grow to larger amounts that could impact your lifestyle. I have seen a number of people have early success, increase the size of their portfolio, then lose the lot.

This, I think, is an excellent hobby. You'll find some very interesting companies, but it's best done just as a hobby, not a money-making venture. I'd love to hear how it works out.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Money magazine
November 15, 2023 12.15pm


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