| Am I better off with low priced stocks? |
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If your commission is $10, and you buy 1000 shares of a $1 stock, it will cost you $1010. If you buy 10 shares of a $100 stock, it will cost you $1010. If either stock appreciates 10%, you will make $90 in both cases. If either appreciates 20%, you will make $190....and so on. It is a fallacy that you should buy lower cost stocks if you have less up front capital to invest. It is more important to buy stocks in good companies that are undervalued, have strong fundamentals, etc. In fact, in a lot of cases, if you are buying extremely low prices stocks, you are buying stocks in distressed companies and will potentially lose some to all of your investment. The psychology of the new investor is that they can buy 'more shares' of lower prices stocks, so the upside is HUGE. This is the total polar opposite of the truth. Don't do it. |