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. 

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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