As an investor, you shouldn’t let whether a stock appears to be “expensive or inexpensive” (in real value terms) affect if we buy a stock or not. What I mean is, just because one share is trading at $100, it doesn’t make its overvalued. Take GOOG for example, many people believed it was trading too high at $200, $300, $400, and now it’s trading upwards to $650. Similarly a stock trading at $1.00 is not necessarily inexpensive. Oftentimes traders won’t take a trade like GOOG because it’s trading so high. Then they end up buying junk stocks at $1 a share hoping they somehow sky rocket.
It’s better to buy a stock you know has a fairly good chance of going up in value than blindly buying cheap (monetary value) stocks and hoping that they go up. When I first started trading stocks, I took the idiot approach and bought cheap stocks instead of quality stocks. I ended up getting burned many times.
1 comments :
Kevin,
So true. Many people do not realize that the stocks actual trading dollar value is not a true indicator of whether it is expensive or not. You are right about cheap stocks. Cheap stocks are usually cheap for a reason and it is usually not a good one. Still, as a trade (and if you are careful), there is money to be made in stocks of all prices, even the low priced varieties.
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