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Small volume in high price stocks

Discussion in 'Beginner's Lounge' started by RonT, May 22, 2020.

  1. RonT

    RonT

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    Hi all,

    I have a newbie (?noobie) question.
    I consider myself a long term investor. I am investing my regular savings, now and then, on high quality stocks, usually between 500 to 1000 dollars at a time. The question I wonder is....what would be a value/meaning for someone like me in buying some of the high price stocks (eg CSL). That is because, I may only end up buying 5 or 6 stocks with my savings and even if the stock doubles its value, my earnings will only be small, at least monetarily. Could someone please educate?

    Thanks
     
    Skate likes this.
  2. Skate

    Skate

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    @RonT, first off welcome to the ASF community. Until recently high-value stock displayed low volatility, hence being perceived as a safe investment. Traders on the other hand look for a stock that display better volatility & with higher volatility there is a direct correlation with risk.

    High volatility means prices move a lot
    Even if you were the best trader in the world, you would never make any profits with zero volatility. In the long term, volatility is good for traders because it gives them opportunities & without volatility, there would be no trading. Volatility has a direct correlation with risk & can improve the risk-adjusted return of a portfolio. High volatility by itself is not bad, but it can become bad when combined with mismanagement or incorrect interpretation of volume. As with volume, volatility is what enables us to speculate in the market.

    A picture paints a thousand words

    Profit Loss Risk.jpg
    Help is only one post away
    The Aussie Stock Forum is chock full of members who are only willing to help if you have any questions.

    How about you have a read of the "Dump it here" thread
    It's sometimes daunting finding your feet in a new forum but till you do "make the search feature" your best friend. I'm always suggesting new members should check out my thread first. As you have mentioned the word "educate" that's the sole purpose of the thread. The "Dump it here" thread has morphed over time from the psychological side of trading to more hands-on system evaluations & posting new trading ideas. Check out the "Dump it here" thread here: https://www.aussiestockforums.com/posts/1005967/

    My free eBook
    You can grab a copy of my free eBook in ePub format "Trading Fundamentals - Skate's Beginners Version eBook" from here: https://www.aussiestockforums.com/posts/1014728/

    Enjoy poking around & asking questions.

    Skate.
     
    Adamroweco likes this.
  3. RonT

    RonT

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    Thanks Skate. I do read your posts (and your book) with great interest.
     
    Skate likes this.
  4. Country Lad

    Country Lad Off into the sunset

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    Many new traders, particular those with limited funds) are daunted by high value stocks. It was not all that long ago that there were many comments about CSL being too expensive at $100. It is three times that now 3 years later. I would be happy if all my stocks grew at that rate.

    If you buy $1,000 worth of a very high value stock or the same $1,000 amount of a spekky there is no difference in the amount of profit you make if the share price of both increase by say 20% over the same period.

    However, there could be a greater chance of the spekky moving higher in a shorter period of time and that is the attraction of low priced shares. When looking at the risks however, there is a greater chance of the spekky falling more, and more quickly, than your quality high priced shares.
    That risk assessment is something we do with the purchase of any shares. I look at the difference in those share prices as low cost against high value (a subtle difference).
     
    peter2, Trav. and Warr87 like this.
  5. RonT

    RonT

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    That is brilliant countrylad. You gave me the perspective and reminded me my basics. Thank you.
     
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