Account comparison

Trading stocks within the $40-$80 range might not be able to deliver huge returns with just a $500 capital compared to stocks trading for a dollar. A dollar movement for a stock trading at $40 moving up to $41 only gives you 2.5% return compared to a 100% return should a $1.00 stock turned $2.00, and 50% from $2.00 going to $3.00. But stocks trading at these range ($40 to $80) offer better quality and less risk than penny stocks (stocks trading under $5.00) after all, if investors are willing to pay that much for a company's stock which is based on their current and future earnings, That should already tell you that clear sunny skies are ahead for these companies. But not all, some of them are just products of pure speculation and are not supported by facts written on their financial statements, and per share price alone won't tell whether it is a quality money making company, even stocks trading at $10-$30 range has some stored punch on them that would propel it higher, we will cover that later but for now, lets take a closer look at how our funds would perform trading higher priced stocks in comparison to lower priced stocks. This time we will use two $600 and $20,000 funds buying $4 and a $40 stock, both would appreciate +$5.00 in value.

Account A ended up with bigger returns since a move from $4.00 to $9.00 is a whopping 125% gain, when trading stocks, the more shares you acquire the higher your return would be even in the slightest of movements. Account B on the other hand gave us a 12.5% return, pretty disappointing compared to 125% isn't it? well in a way yes, It is, but only if you're assuming a positive result which a lot of people are looking forward to. A majority of stock traders across the globe would always want a bigger return from their investment, as we always say, buy low and sell high is the way to do it. But some ended up doing exactly the reverse of that, which is buying high and selling it later at a lower price because they failed to assess if not completely ignore the risk behind that sexy, high octane stock. Looking at the example above states that, the lower the price of the stock, the higher the return would be. It is true and if used on a timely strategy, it can be a powerful arsenal for a fund generating above average returns. But what if that +$5.00 increase in value never occurred and instead, it went south? lets take a closer look.


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