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Unlocking Returns: High Priced vs Low-Priced Stocks Analysis

18 Oct 2023


When investing in the stock market, it is crucial to consider both price and value. Many investors opt for lower-priced stocks, but these come with higher risk. While there are no fixed definitions, stocks below Rs. 20 are generally considered low-priced, while those above Rs. 500 are high-priced. 

Lower-priced stocks attract investors due to the ability to purchase more shares with limited funds. In this blog, we will explore the disparities between these stocks and identify which offer better returns. So, let’s delve into the intricacies of high-priced and low-priced stocks. 

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What is the difference between high-priced and low-priced stocks?

The critical differences between high-priced and low-priced stocks are:

  1. ​Risk: When it comes to risk, low-priced stocks carry higher risk due to infrequent trading and poor performance. Conversely, high-priced stocks are considered safer due to their reputation and market capitalization
  2. ​Investor Preference: Investors are attracted to low-priced stocks because they believe they can buy more quantity, prioritizing quantity over quality. They also perceive lower-priced stocks as having a better chance of delivering higher returns and focus on the lower price-to-equity (P/E) ratio.
  3. Affordability: Newbie investors value affordability and find low-priced stocks more accessible and manageable. Blue-chip stocks may have restrictions on new investor entry, limiting opportunities for investment.  
  4. ​Regulatory Framework: Regulations play a role as well. High-priced stocks face greater scrutiny from SEBI, while low-priced stocks often lack credible information and may not be registered on major stock exchanges. 
  5. Volatility: Low-priced stocks are considered highly volatile, rising and falling rapidly in price. In contrast, high-priced stocks are known for their stability and long-term return potential. 

High-priced and low-priced stocks: Which delivers better returns?

Returns are of utmost importance to investors. The retail price of a stock is not always a reliable indicator. While low-priced stocks may occasionally double in price and provide returns, the chances of this happening are rare. On the other hand, high-priced stocks, valued above Rs. 500, have a greater potential to deliver higher returns, making them a trusted choice for many investors. 

High-priced stocks have consistently demonstrated their ability to generate substantial returns in both short and long-term periods. However, investing in these stocks requires a significant initial investment. Although there is a risk of price decline, high-priced stocks often recover and offer impressive profits. This makes them a lucrative option for growing an investor's wealth multiple times, even in the face of temporary setbacks caused by rights or bonus issues.

To conclude

Investing in the stock market requires caution due to its volatility. It is advisable to conduct thorough research or seek guidance from market experts before making any investment decisions. Furthermore, you can seek advice and suggestions to ensure informed investment choices for your hard-earned money.


Related Articles: What Are Thinly Traded Securities | What is Price Discovery | Difference Between Variance and Covariance | What Happens When a Company Buys Back Stocks


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