The Right Level of Speculation Can Pay off
People say don’t gamble on the stock market, but I believe having a certain level of speculation in your portfolio can pay off big. The secret is to find a stock that will reward you much more than the risk that is involved. A good example has been the recent high flying DNDN. A week ago DNDN was trading at around $5 and the company was meeting with an FDA advisory board.
Now if their drug didn’t get approval from the board, DNDN could of easily dropped to $2-$3 so you could potential lose half of your investment overnight. Now if DNDN got the green light, the reward could definitely be more than the 2-3 points it could potential dropped. Well DNDN did get the green light and it gapped to $18 the next morning. One of my friends bough about 10k shares the day it was halted and sold at $18 when it reopened. He easily made over $100k on this one trade alone.
The risk was definitely there, but like I said if you weigh out the risk/reward and make the right kind of speculation you can hit the jackpot. This type of gambling should only be done with a small portion of your overall portfolio.
