Can Cheap Stocks Really Be the Best Stocks to Buy?
Sometimes the best stocks to buy are the least expensive. Cheap stocks represent great potential for smart investors, but they aren’t for everyone. To know if they’re right for you, you need to know what kind of investor you are.
There is no “one size fits all” ideal type of investor, because everyone has a different tolerance for risk. Age, philosophy, experience, net worth, and knowledge also factor into determining what kind of investor you are.
Although investors are individuals, there are actually four basic types of investors. For each type, the best stocks to buy will be those which give that investor confidence and peace of mind.
The Traditional Saver is the kind who wants to minimize risk as much as possible. This kind of investor will invest only if their principle is virtually guaranteed. For this investor, the best stocks to buy are those which primarily protect the wealth they have. In fact, these investors aren’t usually comfortable buying stocks, and prefer bonds and similar guaranteed instruments.
The Conservative Investor is similar to the Traditional Saver, but a little more adventurous. The Conservative Investor will take on more risk than the Traditional Saver, and they are they are willing to go out on a limb for a better return – but not too far out on the limb! Typically the best stocks to buy for this type of investor are blue-chip stock, high-yielding mutual funds and the like.
Then there’s the Speculator. The Speculator is interested in getting higher overall returns and is willing to risk a portion of their portfolio for the chance. This type of investor will find the best stocks to buy are those that will help them diversify their portfolio. Usually that’s a mix of blue-chips, foreign or other high-yielding stocks, energy and commodities stocks, and occasionally a few jackpot pink sheets or ten bagger penny stocks.
Finally, there’s the Aggressive Speculator. This kind of investor knows what he wants first and foremost – profits. He isn’t afraid to move aggressively and quickly on a good play. Aggressive Speculators like the challenge of fast-moving stocks that offer potentially highly lucrative trades.
Aggressive Speculators are usually highly flexible, short-term oriented, and make quick decisions. For this type of investor, cheap stocks, such as penny stocks or Pink Sheets, with a small entry point are definitely among the best stocks to buy.
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