The Fallacy of trying to buy low priced stocks for better returns
By Vivek Banka

GoalTeller begins its GT insights series on 18th July 2022, with an interesting analysis of stock returns for different stock prices i.e. Just the stock price (not the market cap or anything else) because that's the usual question, most of our friends/ families ask us - " Chhota price ka stock batao" as they feel they get lesser units from higher priced stocks and hence they will make lesser wealth.

The same thing happened last week when our colleague asked us this same question coupled with several YouTube videos we came across that tried to play along the same emotions. ( If you type " low priced stocks" on YouTube search you will get a bunch of such vides) . This tempted me and my colleagues Rahul Gupta and Udit Garg to analyze this basis actual data points.

Our analysis shows the exact opposite where returns actually move higher with higher stock prices. Though we don't have an exact reason for this attribution, this is most likely as higher priced stocks have stronger and larger hands holding them while the opposite is true with low priced stocks.

The analysis is limited to last 5 year returns without accounting any change of price zones for stocks, however the severity of the data points across > 2k listed stocks make us confident that this will be the case with any time zone analysis we do here.

Attached is an infographic for reference.

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