A lot of investors become infatuated with the idea of buying a stock for pennies and making millions. While it’s nice to dream, is it really wise to buy low priced stocks with the expectation that you’ll hit it big? Probably not, but people do so anyway. In this video from Mullooly Asset Management, Tom and Brendan talk about low priced stocks and their opinion on purchasing them.
For whatever reason, there are a ton of investors who would much rather own 1000 shares of a $4 stock than 100 shares of a $40 stock. Basic math tells us they’ll make the same amount of money if they grow at equal rates, but people seem to enjoy that feeling of gambling on a cheaper stock. Tom and Brendan believe that investors should view buying a stock for under $5 as more of a lottery ticket than a sound investment decision. In most instances, the odds are going to be stacked against you making tons of money. They discuss some of these reasons in the video. If somebody you know has an obsession with cheap stocks or penny stocks, watching this video might help them realize they are choosing a risky investment strategy.