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chetan p | Is it better to purchase low priced shares than high priced ones ? |
If one selects low priced shares to purchase, he gets more no. of shares , also, more divident. Is it advisable to do so ? |
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muncie birder
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This is an interesting question! Lets see if it can be answered adequately.
of 1334 stocks currently priced below $5.00 a share only 150 have increased 10% or more in the last 5 years. 11.2% Does not look good for the lowest priced stocks.
of 1034 stocks currently priced between $5.00 and $10.00 a share 232 have increased 10% or more in the last 5 years. 22.4%
of 1746 stocks currently priced between $10 and $20.00 a share 403 have increased 10% or more in the last 5 years. 23.1%
of 1443 stock currently priced between $20.00 and $40.00 a share 567 have increased 10% or more in the last 5 years.
39%
of 981 stocks currently priced between $40.00 and $80.00 a share 537 have increased 10% or more in the last 5 years.
54.7%
of 235 stocks currently priced between $80.00 and $160.00 a share 147 have increased 10% or more in the last 5 years. 62.5%
I believe the data speaks for itsself. The higher the price of the stock, the more likely it is that you will receive a better return. 62.5% probability for the highest priced stocks verses only an 11.2% probability when buying the lowest priced stocks. That does not include all of the lowest priced stocks that went bankrupt in the last 5 years nor the highest priced either I might add. |
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ropman1
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Don't worry about the price per share. Find a company you are interested in investing into and then determine the amount of money you want to invest.
Low-priced securities are low for a reason. I could write paragraphs, but I don't have time. Don't be fooled by penny stocks or low-priced securities. They are usually thinly traded and don't pay dividends.
Best of luck to you. |
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Kevin S
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There have been studies in several books that have indicated that lower-priced stocks do grow at a slightly faster rate - maybe a percent or two.
Despite this study, I think it works in theory and not in practice, and here's why:
You are getting more shares because there are many more shares outstanding, so nothing changes. The dividend yield does not change - it is based on market cap.
As for the study of growth, I'm quite skeptical. It is common knowledge that small caps grow faster than large caps, and it just so happens that more small caps have lesser average share prices than large caps. So in reality, there is no price correlation to share growth, and it is likely just market cap.
Even so, people buy stocks for three reasons - they think price will increase because it's low, they like the company, and they like the value of the company based on assets and growth.
Even if the lower price attracts the investors who think it is low and the others who like the company, eventually it will fold back on itself because the asset and growth values will not follow. Buying and selling determine prices, but in the end the true growth and asset values will determine where the stock will be.
Ex. - tech bubble - people like the internet, people bought stocks because they though the price will go up. Once these buyers dried up, they had no growth and asset support, and it folded back on itself (they were once trading at P/Es of over 100! - insanity).
As a result, price should not be a player in your investing. Dividend yield and market cap are more important. The only time the number of shares would be crucial (compared to price) is if you were short on money and needed round lots for your broker and/or specialized strategies. Good luck! |
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Rhon B
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The price of a stock doesn't tell you anything about the company.
If I say one stock is priced at $312 and the other is $45. Which one would you buy, the $45? What if I said the $45 company was Bear Stearns and our time period was 3 months ago. |
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Randomname83
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Buying shares at a low valuations can be advantageous (not always) and is one of the investment strategies.
A stocks price though has NO bearing on the stocks valuation. The market capitalization of the company compared to its net income (or the share price divided by earnings per share) is one indicator of the stock's valuation.
Is it advisable to buy a stock based on its stock price? NEVER.
Is it advisable to buy a stock based on its valuation (Price/Earnings ratio) - Sometimes. |
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knuckle dragger
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Price has nothing to do with it. The valuation of the stock is what matters. Yahoo & other sites have very good explanations of some of the key statistics that are useful (P/E ratios, the Beta factor, etc.). In general, remember to consider any purchase to be an investment rather than a simple gamble.
The number of shares is insignificant. EXAMPLE: Stock A is priced at $100.00 and Stock B at $1. You invest $500.00 in each stock (5 shares of A and 500 shares of B). Each stock moves 10% over the course of one year. At the end of the year you now own 5 shares of A worth $110.00 and 500 shares of B worth $1.10. A's total value is 5 x $110.00 = $550.00 and B's total value is 500 x $1.10 = $550.00
Regarding dividends, you must remember that if a company is paying out money to its shareholders, it loses the opportunity to reinvest that money in the company. Your pursuit of dividends should be tied to your investment strategy. If you are looking for stocks with large, long term growth potential, the company should not be giving out large dividends. Rather, they should be reinvesting the money to pursue growth opportunities that will make the company worth more in the future. |
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principles
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It's an interesting question and depends on your trading style. Also, not all stocks pay dividends.
I'm a swing trader of sorts with very few long positions. Most of mine are closed out within weeks and/or months. I only hold two long term positions at the moment. I hold another six to 10 positions swinging in and out.
Let's say SIVC was purchased on 4.28.08 for .0033 per share. Holding 1,500,000 shares would give a current value of $11,250 with todays closing price of .0075. Without fees, the purchase would have been $4,950.
APWR could have been purchsed at $15.70 per share the same day. $4,950 would have given 315 shares for a total value today of $9,308.
I hold both and that is why they came to mind.
Just be careful with penny stocks. Most are more dangerous to play than the big board stocks for a variety of reasons. But, if you do proper research you can find a gem here and there. SIVC is rare for a penny stock.
And, both of these are quality stocks. I do expect to have a much higher return on my money with SIVC than APWR by this time next year. Time will tell.
Another thing is that I tend to buy more on dips with stocks like these that are in an overall uptrend.
Good luck with your picks. But, most importantly, do a bit of research. There is no hurry to jump into anything. They all come down for dips. Don't chase the runs. Buy when others don't want them, and choose your stocks carefully.
My swing trades are usually chart based without any concern about fundamentals. My long term trades are fundamentals based.
Also, stay away from stocks advertised in spam emails. They are pump and dumps. They fly high and crash lower. |
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robe
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Of and by itself, this statement is meaningless.
Look for great stocks in hot sectors that are moving and have great leadership. Then jump on board in a pullback.
Simply buying a low-priced stock, without the above qualifiers, is a great way to burn or idle your money. Anyone can invest. To successfully invest requires homework. |
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thomasawd
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I like to buy both. I have penny stocks, small-caps, mid-caps, and I just bought AMZN which is a high-cap. At the moment, my penny stocks aren't doing too well, but everything else is up. |
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stock_sniffer
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Stocks below $5.00 per share on average move 5 times faster than stock above that price. Often because of the wide bid and ask percentage differences these cheap shares should only be purchased if you are willing to hold for many years in case they do not rise in price in your favor immediately, so should be considered for long-term investing only, as a higher financial vehicle payoff than a bank's 5 year certificate of deposit would pay with low interest.
On price it really does not matter as long as the stock price goes higher than your buy price.
Also stocks drop in price much faster than they rise most of the time.
Stocks often pay a dividend yield so you must take that into consideration over stocks that do not, as a consideration over price and that the higher the yield the stock pays the more speculative it may become. |
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