Boeing Company (BA)

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Why do new investors prefer very low price stocks? The benefits of low priced stocks are an illusion.

When you look at a list of stocks, like in a newspaper, virtually all shares range in price from a few dollars to about $100. A new investor might conclude that there is a floor to stock prices of about $2.00 to $5.00 and a ceiling around $80 to $100. You'll never see $0.0001 issues in a newspaper.

So the newbie investor concludes that a $77 stock such as Microsoft is about as high as it can go. Nothing in that list tells him that most older issues would sell for many thousands of dollars if they hadn't split many times over the years.

Microsoft for example has split nine times and often traded at about $120 before splitting.

$77 is actually fairly low for MSFT. Even at its IPO price in 1987 ($22) it quickly rose to over $120 which turned out to be a bargain price.