Low-priced stocks may have more room for price appreciation. In some cases, they are seen as undervalued or at early stages in their growth cycle. In other instances, investors feel that quality stocks with relatively low prices represent superior value due to market inefficiencies that could be corrected at any time.
Some low-priced stocks are speculative. They offer opportunities for high total returns if the company successfully executes on its business plan or rebounds from a downturn. Such stocks have tremendous potential but are only suitable for more aggressive investors.
If you’re attracted to lower-priced stocks under $20 and see value in diversifying your portfolio to include this category of equity securities, check out this list of seven cheap stocks to buy now for big gains in the future.
This post originally appeared at U.S. News & World Report.