Every new investor I have ever known – myself included – falls into the same trap: We tend to gravitate toward the penny and sub-penny stocks.
It’s natural to have visions of grandeur dancing in our heads of how we bought 10,000 shares of a $.01 stock that goes to $1.00.
Can it happen? Sure, anything is possible.
But is it likely? No. There’s a reason the stock price is a penny.
Most new investors would never think of buying a high-priced stock. When I say high-priced, I’m talking about stocks that are $100, $200, $500, even $1000 per share.
I know this was many years ago, but Berkshire Hathaway (NYSE: BRK.A) was once priced at $1000 per share. Today, it’s $300,000 per share. So as it turns out, that $1000 share price was a steal!
Most stocks that are priced that high are proven businesses – and, believe it or not, carry less risk than a stock priced at $1 or $2.
Let me give you an example.
Mercado Libre (NASDAQ: MELI) is “the Amazon and eBay of Latin America”. A few weeks ago, the stock was $368 per share.
The day after they reported earnings, the stock opened at $410 and closed at $448. You would have made 21% in one session.
A few days later, it traded as high as $512. This would have been a gain of 38% in less than a month!
Remember: when we buy stocks, the percentages we make are the same, whether the stock price is $1 or $1000.
Higher priced stocks very often offer higher returns and less risk than lower priced stocks.
So don’t be afraid to buy high – and sell higher!
My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.
Click the image of the book at left to be taken to its Amazon page. (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)