#62 - 5 Misconception For Beginner Investors

Misconception 1:

Lower priced stocks go up faster than higher-priced stocks (penny stock vs. Amazon/BRK.A/MRF)

Stock trading for $3 can double to $6 faster than a stock trading at $1000 to $2000.

Example:

Ford

Oct 2016: $11.74

Sept 2021: $12.89

BRK.A

Oct 2016: $215k

Sept 2021: $424k

Misconception 2:

Stock Splits means the stock will go up because the price per share is now lower.

You don’t get free shares for stock splits. So quantity increases, but the price also goes down.

Misconception 3:

IPOs always go up.

Misconception 4:

Looking at the stock price and not the market cap.

TCS price is Rs. 3800, but the market cap is 14 Lacs Crore

MRF price is Rs. 82,000, but the market cap is 35,000 Crore

MRF is not bigger than TCS.

Misconception 5:

Mutual Funds and Individual stocks are different asset classes.

Bonus:

Stock is expensive because the share price is high. Jaguar Health at $1.16 is more expensive than Shopify at $1500 because we have to look at the underlying fundamentals of the business and not just the stock price.

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