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Looking For Cheap Stocks

JJM03 |

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Investing in cheap stocks isn't just looking for the lowest priced stock out there to invest in. It's about finding a stock that is cheap compared to its value. It this type of investing that has made Warren Buffet a billionaire. Mere mortals like us can also invest in cheap stocks like that too.

Cheap stocks is a relative term. Yes something priced at $1 per share can be cheap, but is it good value? Even at $1 a stock can be overvalued and hence not be cheap.

What you are looking for is value. As you witness the stock market meltdown in 2008-2009, you saw plenty of stocks get cheaper. AIG went form a high of over $60 to under $2 a share. When is went from $60 to $30, its was cheap comparatively, but did it represent good value? Obviously the answer is no.

So what should you look for in cheap stock trading? This is where you will have to do some research. You could simply try out or subscribe to newsletter that will comb over stock reports looking for undervalued cheap stocks. Value Line has been publishing a table with stock trading below their assets value. This is known as value investing made popular by Benjamin Graham and Warrant Buffet. This type of investing looks for companies that sell for below their breakup value. By investing like this, you have a degree of safety in your investment. As Warren Buffet as said, there are 2 rules to investing, rule 1, don't lose money. Rule 2, if you lose money, see rule 1.

That is one way to invest in cheap stocks. Another way is to look for mutual funds that invest in undervalued or cheap stocks. This allows you to spread your investment dollars into several stocks that the mutual fund regards as cheap. By using a mutual fund, you are having professional money manager's research and invest for you. Some funds you might want to look into are TRowePrice, Fidelity and USAA Mutual Funds.

You could also do your own research. You can look for cheap stocks that haven't been discovered by Wall Street yet. Doing your own stock picking can be very rewarding. Some treat it like a puzzle, sifting through information looking for a buried gem of a stock.

So begin your search for the right cheap stock. Check out some newsletters, look at some of the mutual fund families and see which is the right way for you to go. Then find the best cheap stock and increase your investment returns.