Most investors want to put their money in equities but may not be able to afford large stakes in valuable companies with higher priced stocks. For them, low-priced stocks could be attractive as these will enable them to buy more number of shares instead of just a handful of higher priced stocks for the same amount. For example, an investor willing to spend $10,000 can either purchase at least 500 shares of a stock trading under $20 or only 100 shares of a stock trading at $100.
Additionally, stocks under $20 reap huge profits as an increase of as less as a dollar in share price adds 5% to the portfolio. This is in contrast to stocks priced at $100 or above, which see 1% or lower gains if shares move up by $1. Further, most of the low-priced stocks have high levels of liquidity that give these stocks an added advantage. This means that cash can be converted quickly and investors could easily get their money out of the securities. In fact, trading in higher average daily volumes keeps the bid/ask spread tight and does not lead to extra cost for the investor.
And guess what, the ongoing bull and bear tug-of-war has provided investors great opportunity to tap some of these from a long list. The preference is not only limited to the stock world but can be felt in the ETF space as well. In fact, there are less than 500 ETFs that currently trade below $20 out of nearly 2,000 funds, suggesting that choices are pretty good for investors who like to get a decent number of shares from their investment.
So, let us dig into some of the ETFs that are below $20 and have AUM of over $300 million and average daily volume of more than 100,000 shares. These low-priced ETFs could lead to huge gains in the coming months.
Fidelity MSCI Energy Index ETF (FENY – Free Report) – Price: $18.82
The global energy market has been on its way towardbalancing, draining out the excess inventory through the historic OPEC output cut deal. Though higher production in the United States seems to be a hurdle, accelerating global economic growth since the financial crisis, with a consumption boom in both developed and emerging markets especially in China, as well as geopolitical uncertainty bode well for the sector.