Don’t be a Cheapskate Trader: Pay for Quality


Many new traders and new investors make the mistake of looking for and buying cheap stocks. Do not fall into the cheapskate trader trap, instead just pay for quality. Cheap stocks are cheap for a reason, they vast majority of the time they are junk. Quality stocks rarely if ever trade for under $15 and the best stocks trade for $100, $200, even $500 or more. Why? Stocks are valued based on earnings power and share float. Even initial public offerings come out with a price of $15, $20, or more out of the gate the majority of the time.  Truly great stocks almost never trade under $15 at any time. Stay away from the temptation of wanting to trade bigger positions and start trading 1,000 shares of a $7 junk stock instead of a smaller share position in a quality stock that costs over $100 a share.

Stocks are no different than other areas of life. If an NFL team wants to win a super bowl the majority of the time they have to pay for some top players, they would not win by getting the worst players because they were cheap and then expect them to rise in value on the field, why would you expect the worse stocks to change their trend? You would not buy a cheap economy car and then expect it to perform like a luxury car or sports car, you have to pay for that performance. You can not expect a stock to perform like a 5 star restaurant at  a McDonald’s price.

The best performing stocks were never penny stocks, they were never traded in the over the counter market or on the pink sheets. Trade in the light of the major exchanges and trade only the best companies in the world. That is where the money is made in the stock market. The best stocks do not hide under rocks and they are traded for pennies. Buyer beware of the bargain bin and stick with the high quality earnings growth stocks.