Investors want to buy stocks that are successful. One problem with successful stocks is that they can sometimes have high prices. Investors see the high price on the stock, and decide they would be better off buying something less expensive. This doesn’t have to be the case though. You don’t have to let highly priced stocks intimidate you. In this week’s Mullooly Asset Management podcast Tom and Brendan talk about how to buy expensive stocks.
Maybe you’re interested in owning a stock like Google, Apple, or Precision Castparts. Not all three of these are household names, however they share a common trait. Currently (December, 30 2013), they are all priced above $250 a share. Google is over $1,100 per share! But these stocks are priced highly for a reason; they’ve all performed quite well. So you want to hop on board but you don’t know how to buy expensive stocks, right? It’s quite simple really, as Tom explains.
ETFs, or Exchange Traded Funds, are something we’ve discussed before here at Mullooly Asset Management. You can find some educational posts about ETFs, what they are, and why they could be worth owning here. An easy way to gain exposure to a highly priced stock you like is to purchase an ETF that has a large percentage of its holdings in that stock.
Tom and Brendan go over some examples of ways investors could potentially get involved in stocks like Apple, Google, and Precision Castparts. In fact, they identified six ETFs where Apple represented at least 10% of the basket. ETFs are also nice because instead of just owning one stock, you own that stock and you also own a group of its peers. By peers, we mean other stocks in its sector. As we’ve talked about before, our friends at Dorsey Wright and Associates have shown us that the majority of the risk in stocks comes from knowing whether to be on offense or defense and knowing which sectors to invest in. ETFs allow us to own not only individual stocks we like, but entire sectors that we may like.
When it comes to highly priced stocks, many investors allow the “sticker shock” to scare them away. Tune into this week’s podcast and learn how to buy expensive stocks the easy way through ETFs. Tom and Brendan’s examples will give you a great idea of how ETFs can benefit you and your portfolio.