Thursday, October 26, 2017

Don't Let CHEAP Stock Price Entice you to Buy!







An IMPORTANT equally valid words of wisdom for investors could be, "Don't judge a stock SIMPLY by looking at its share price or in relation to its peers in the industry." Despite much readily available information for investors, many people (including me!😀) still incorrectly assume that a stock with a small dollar price is cheap and a BARGAIN, while another with a heftier price is expensive and OVERVALUED. This misconceived notion can lead investors into some bad decisions for their money and burn a big hole into their pockets.

Unfortunately, the cheapest stocks - "penny stocks" - also tend to be the riskiest. Not to mention the penny stocks are a COMMON GAME PLAY of stock pump and dump and stock syndicates. Looking at a stock's share price is only useful when taking many other factors into account.


Some Relevant Factors to Consider before Buying😎


  • Relative Strength in Industry
  • Company's debts in balance sheet
  • Share price to Earnings (PE Ratio)
  • Number of shares issued in market
  • Management Competence
  • Any Bad News on Company and Industry


Conclusion



Some investors may focus on share price when looking at a stock, because it is the most visible and talk about number in the financial press. Investors should not get fixated on share price alone, because companies can manipulate share prices dramatically through various means without changing fundamentals. Please dig a little deeper when thinking about your next investment, and remember that a stock with a high price can go much higher under the right circumstances, just as a stock with a low price can sink even further if it isn't really a good value.

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