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Stocks under $20 offer investors and traders a lower-cost alternative to more expensive stocks. Despite the misperception that lower-priced stocks carry more risk, the risk profile of many stocks under $20 compares favorably with stocks trading at much higher prices, as does the opportunity for profiting from investing in them. At the same time, you may need to be patient because $20 per stock can constitute quite a lot of money before the asset finally begins to rise, meaning that you may feel locked into these positions.

In addition, well-established stocks under $20 often pay dividends, which can be ideal for income-minded investors. Some stocks under $20 even have listed options, which can give you additional avenues of income if you wish to sell covered call options. You may also choose to buy and hold because, even though the price is just under $20, you see quite a lot of growth potential in these assets (or the growth of your portfolio at-large.)

Whatever your investing or trading goals might be, stocks under $20 cover a wide range of companies and can offer great opportunities for profit. At the same time, you must exit positions that are no longer profitable, allowing you to enter new positions that may be more profitable. You can repeat this process as often as you need, allowing you to optimize your portfolio over and over again, meaning that it can be much easier to rebalance your portfolio. Assessing your assets routinely is always an important move for the savvy investor.

Overview: Best Stocks Under $20

Our picks for best stocks under $20 include companies like precious metals and mining funds, manufacturers, retail firms, family entertainment companies, international e-commerce and internet businesses and much more. Each of these stocks represents a company with a unique product or service or one that already holds a prominent position in its field. At the same time, some of these stocks have only begun to rise. When you invest in stocks under $20, you need to know if you will hold the stock and watch it rise, swing trade when it rises or buy at the dip because you feel it has peaked for the time being.

Choosing stocks of this value can be complicated because there’s so much to consider. The stocks are officially “pricey”, but you need to decide if they are too pricey for you. At times, it’s worth the investment, but some people may prefer to invest in stocks that are a little lighter on their budget. For example, you could look into penny stocks, energy stocks and more as you aim to diversify your portfolio.

At the same time, remember that you need to spend money to make money in many cases. You should not be afraid of stocks that rise near the $20 mark, but you may need to budget for yourself so that you can spend with wisdom. As your portfolio grows, you may have more freedom to invest in more expensive growth stocks.

Best Online Brokers for Stocks Under $20

If you’d like to start trading or investing in stocks under $20, as well as stocks under $10 and stocks under $5, you can through any reputable broker with access to U.S. stock markets. Many online brokers, such as Charles Schwab, Magnifi, Vanguard, TD Ameritrade, E*TRADE, Robinhood and Firstrade, offer commission-free trading. More experienced, active and well-funded traders can use Interactive Brokers. A broker comparison table to help you choose among them appears below, and you are free to change your allegiances at any time. Plus, you can return to Benzinga whenever you want to learn more about choosing a brokerage.

Features to Look for in Stocks Under $20

• Desirable product or service: To achieve success with stock investments, one of your first and foremost considerations should be whether the company has a viable product or service with significant current or anticipated demand for future earnings growth. However, companies that seem to go stale may no longer express the same growth potential that they once had.
• Good financials: Reviewing the financial profile of the companies whose stocks you’re considering buying will give you a sense of the firm’s assets and liabilities. Pick companies with a solid and improving financial situation and avoid those facing serious business challenges. You can also look for companies whose earnings per share (EPS) do not yet reflect the future business scenarios you expect for them.
• Analyst ratings: Because liquidity tends to be higher with stocks under but close to $20, many market analysts take the time to review and rate them. Their professional analysis can give you a good idea of whether a stock shows promise as an investment. Also, when a company’s stock receives a good review from a reputable analyst, it tends to attract buying interest in the stock. This then causes the stock’s market price to rise, meaning that you can see some value in the asset, which might allow you to draw value from these assets.
• Quality management: You need to invest in companies that you believe are managed properly. If they’re not managed properly, they may not have the capacity to maintain their stock value. If that’s the case, you could spend more time worrying about these assets than managing your portfolio.
• Growth potential: When you invest in stocks that have risen near $20, you may wonder if they can continue to soar. This is when you decide whether you want to hold the stock or cash out because you feel it cannot continue to grow as anticipated. At the same time, you may choose to invest for value, meaning you need to be far more patient.

Are Stocks Under $20 Worth Buying?

While some stocks under $20 are definitely worth buying and holding in your portfolio, you do need to do your research on a company before pulling the trigger. You also need to choose carefully because some stocks are on their way to 0 as their companies head toward insolvency, while others could be the next rising star. 

Consider looking for inexpensive companies to invest in with a popular product or necessary service and a respectable financial position. These companies will grow on you, but they need to seem healthy in the present so that they can, at the very least, maintain their value.

Also, if you plan on taking a large position or engaging in short-term trading in stocks under $20 per share, then choose those with decent market liquidity. If you’re not sure, using the appropriate broker can help you gather this information.

The post Best Stocks Under $20 by Wayne Duggan appeared first on Benzinga. Visit Benzinga to get more great content like this.