1) Rs. 1000 is costly and Rs 10 is cheap.
Always remember that a share being costly or not is never indicated by its share price. (PE ratio is the tool needed to compare cheap or costly) It is only indicative of how successful a company has been to the present day. If two stocks had a price of Rs. 10 per share in 1990, and the first one is at Rs 10 today while the second one at Rs. 100. This only means that the first company is a stupid one and not that it is a cheap one. It only means that the company has not increased in size or income for the last many years. Thus it is not worth investment either. While, the other company has grown 10 times in size and earnings and that investors are ready to pay 10 times more for the company than they were 15 years back. If one were to choose which company to invest in, given only this data above, it would be very very stupid to invest in the first company saying that the stock is cheap. Chances are that you will be sitting on a share of Rs. 10 even 10 years down, not gaining any money, but losing the interest that you would have earned otherwise.
2)By getting Bonus or by a Stock Split, you have gained.
A stock split is like giving 10 one rupee coins for a one rupee note. Period.
A bonus is a bit different, but for an investor it makes no value addition.
I will try to explain Bonus issues later.
Actually this is one misconception that I have found the toughest to get out of the heads of people
3)Buy 52 week lows.
How many times have you searched the papers for the 52 week lows trying to find a stock that was worth a buy!!! Never ever buy a 52 week low. It is like trying to catch a falling dagger. Stock prices don’t fall or rise without a reason. If some stock is at a 52 week low there is a reason. Chances are that the fall is not over and the stock may fall further.
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