High-Priced Vs Low-Priced Stocks - Which Delivers Better Returns? (2024)

When it comes to risk, low-priced stocks possess high risk compared to high-priced stocks. The primary reason for low-priced stocks being highly risky is they are traded infrequently.
They have been actively present in the stock market for a long time but may be performing poorly. Hence they are available to investors at a low price.
Due to this, it increases their risk factor. On the other hand, high-priced stocks are less risky due to their reputation and market capitalization. Hence they are considered safe for investment.

SEBI (Security and Exchange Board of India) monitors the activity of all stocks in the stock market. The high-priced stocks face greater inspection because they are the center of attraction in the market, whereas low-priced stocks do not capture much attention from the investors. Most of the time, they are not even registered on significant stock exchanges and do not contain any file with SEBI.
Fewer rules and compliances create a lack of credible information to make an investment decision. However, high-priced stocks have their privileges and advantages, yet lower-priced stocks grab several investors' attention, but how?
Often, investors think that with a larger amount of money, they can buy more quantity of stocks with low-priced stocks, which means they prefer quantity over quality.
Several investors believe that the lower value of a stock has a better chance of doubling up and delivering higher returns. Also, going by the trend, they have the capability to generate huge returns despite having a lower price.
Some investors focus on the Price to Equity (P/E) ratio while making the investment decision. The low-priced stocks come with a lower P/E ratio which means the investor has to pay less money to buy stocks of a particular company.
Due to this reason, low-priced stocks capture the attention of investors, and high-priced stocks fail to do so.

Volatility means fluctuating the average price of the stock. The low-priced stocks are cheaper, and hence they are considered highly volatile. Naturally, they have higher to fall rapidly in price because they rise and fall in a short span and frequently.
Hence, investors looking for security and stable stocks don’t prefer low-priced stocks. But, on the other hand, high-priced stocks act differently than low-priced stocks.
Due to their market value, they are considered less volatile. Hence investors invest in high-priced stocks because they are known for their long-term capabilities of generating returns.

The low-priced stocks are generally affordable to all newbies investors who just entered the stock market world.
The newbie investors prefer low-priced stocks to high-priced ones because they are easy to buy and manage. On the other hand, in the case of blue-chip stocks, there are certain restrictions on the entry of new investors.
Many new investors do not have the opportunity to increase their investment in high-priced stocks because of their portfolio or any other major reason.