Penny stock investing is for gamblers. We think you are better off using these alternative financial planning tips to prepare for the long haul.

Are you interested in penny stock investing? We have some advice: the longer you invest in penny stocks, the more likely you are to lose money.

If you lose money in speculative pennies or other low-quality stocks (or ETFs that invest in low-quality stocks), you may think your primary mistake was bad timing. That’s a misconception. Almost all penny stock investing relies on luck. But if you play long enough, the “house odds” eventually triumph over any such run of luck.

In penny stocks or games of chance, the odds are against you. So, time works against you. As mentioned, the longer or more often you play, the likelier you are to lose.

Investors are continually deluged with promises of lifelong financial happiness with penny stock investing systems. Some of these systems make legitimate if overly optimistic claims, others are frankly deceptive or fraudulent. However, there is no penny stock investing formula to financial security.

Penny stock investing is not a promising investing activity

If you’re an investor seeking financial security we can assure you that penny stock investing is not the way. We do have 8 financial planning tips for achieving financial security that are universal truths for all investors. But first let’s review our successful investor method.

Our approach begins with our time-tested 3-part strategy: invest mainly in well-established, dividend-paying companies, spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities); and avoid or downplay stocks in the broker/media limelight.

If you follow that up by investing money with a disciplined plan for saving during your working years, and selling your stocks as needed in retirement, you’re on the right track toward optimal investment gains

Here are 8 key financial planning tips to help you make that plan work most effectively:

1. Only buy bonds or other fixed-return investments if interest rates are high enough to be attractive. Don’t buy bonds just to “cut your risk.” After all, our 3-part advice already takes a lot of the long-term risk out of investing. Adding bonds to the mix will simply cut the volatility of your portfolio value in any given year. But it does so at the cost of increasing your risk of loss to inflation.
2. No matter how attractive they may seem, always take a skeptical approach to buying financial products that add an extra percentage point or more to your yearly costs. Make sure the expense is worth it. This speaks to the core of all financial planning tips, which is to conserve capital at all costs.
3. Be skeptical of advice that comes from advisors or institutions that sell insurance or other fee-heavy investment and financial products. The financial software they use naturally churns out investment plans that involve the kind of frequently-hidden costs we mentioned in point 2.
4. There is no secret investment growth in insurance products, so our advice is that you should only buy what you need. For most people, this usually comes down to term life insurance for the main breadwinners in the family unit
5. Before you start investing in disability or income-replacement insurance, read all the fine print closely. Just as important, assume the insurance company will decide borderline cases in its own favour, since that’s often what happens. Viewed in that light, you probably won’t like what you find. That’s why they put it in the fine print
6. In contrast, we believe you should be investing as early as is practical of all registered savings plans—RRSPs, TFSAs, etc. RESPs are particularly attractive, due to the government grants that come with them.
7. Put off buying a house until you can afford one that you’re likely to want to live in for at least 10 years, if not 20 or more. Real-estate commissions and other costs of selling one home and buying another add up to a lot of money. Worse, it comes out of your after-tax income. You’ll be far better off financially if you instead keep that money invested at, say, 6% to 8%, all the more if you can do this on a tax-deferred basis. New investors may not have thought about the different financial planning tips involved for real estate.
8. Put off marriage and children until you find a potential mate you think you’ll want to stay with as long as you live. Of course, you may change your mind—nearly half of all marriages end in divorce. But before beginning a family, you need to recognize the economic cost of divorce. Supporting two households for a decade or two takes a huge bite out of your retirement savings. The current dollars themselves are a major drain. But you lose far more by missing out on an opportunity for decades of compound investment growth. Pre-nuptial agreements are part of the many financial planning tips and tricks couples and use to protect their assets in the case of divorce.

Not all of these financial planning tips may apply directly to your current situation, but if you take all of them into account, you have a far greater chance of finding financial happiness than those who have succumbed to the idea of a “magic formula” for wealth.

Have you ever tried a penny stock investing system? Was it profitable for you? Please share any experiences and financial planning tips in the comments.