The stocks that trade at a price of less than $5 per share are known as the under $5 stocks. Such stocks do not necessarily belong to small companies and have a lower price for a reason. They may belong to startups with high potential risks; however, they may also belong to established companies going through a temporary headwind.
The under $5 stocks belong to the high-risk high-reward profile and can make or break a portfolio. They hold the potential to generate lucrative returns while at the same time, they can be a complete gamble.
Factors to Consider Before Investing in Under $5 Stocks
The most significant factor to consider before investing in under $5 stocks is the risk and volatility associated with them. Investors must perform complete and thorough research before investing in them.
Under $5 stocks are an easy way for novice investors to enter the market. However, for the ones who don’t know what they are doing and simply follow the market tips and trends, under $5 stocks can prove to be downright disastrous.
Thus, it all boils down to research while investing in under $5 stocks. Despite the high volatility and risks, if investors choose the under $5 stocks of companies with strong fundamentals, experienced management teams, and excellent business models, the investments can generate high returns.
Which All Under $5 Stocks Should I Buy?
There are hundreds of stocks that trade at less than $5. To make your selection easier, we have formulated a list of the top under $5 stocks.
Investors must ensure that the under $5 stocks have reported sales growth of more than 15% in the past five years, in addition to being profitable. The risks and rewards must be weighed, and investment should be based on solid fundamental and technical analysis.
Under $5 stocks are not just for speculators. Investors who are able to recognize positive traits through their research can make good money by investing in under $5 stocks.