$3,000 for One Share of Stock Could Make You Rich

Do you need an AudioBook Narration, or do you want someone to Narrate your YouTube/podcast script, then please do check out: https://www.linktr.ee/unitynarrator

I’m not a big fan of article headlines that claim doing one thing can make you rich. More often than not, they’re bullshit. However, from time to time we require melodrama in the theater of personal finance. It’s like splashing cold water on our collective face. Sometimes, it’s the only way to get past some of the biggest psychological hurdles investors face.

The Motley Fool recently asked if you should spend $3,000 to buy one share of Amazon.com stock. I wasn’t happy with the article so I decided to write my own.

The main issue I have with the above-linked article is that it ignores the psychological components of investing. They’re particularly important when asking this question. In addition, the article falls back on standard answers that will bore most readers, either because they’ve heard the answers dozens of times before or the answers simply don’t move them to care.

In this article, I hope to move you enough to care.

For the record, as I write this Amazon.com trades for $3,166 and change. So you’d actually get less than one share for your $3,000. This is even better. We don’t feel like we’re getting anything when we “spend” so much to receive so “little.” This is one reason why so many investors find penny stocks attractive:

You have $100.

If you purchase a $100 stock, you own one share. That doesn’t look or feel very baller.

That same $100 can buy you 1,000 shares of a $0.10 stock. A large position in a low-priced stock not only looks better to certain parts of your brain, it flashes an enticing, even if unlikely risk-reward scenario.

The ill logic behind the thought trajectory penny stocks can take you on seems absurd, until you’re swept up in it. It can wreck otherwise sane and logical individuals.

You look at the $100 stock and imagine your penny stock getting there. If it does, your 1,000 shares are worth $100,000.

You make yourself believe this can happen. That it will happen.

Except it’s probably not going to happen.

Conduct this exercise with $3,000 instead of $100 and it becomes even more interesting. $3,000 gets you 30,000 shares of that $0.10 stock and less than one share of a stock that trades for $3,166.

To be clear, this isn’t about Amazon. You’ll decide for yourself which companies to buy. This is about the overarching issue of holding fractional or a relatively small number of shares in well-established companies versus a huge number of shares in an unproven, speculative name.

You can get lucky and hit a home run with a penny stock. But, again, it’s dangerous territory to enter. Buying penny stocks is little more than a psychological trick we play on ourselves. It’s akin to living beyond our means.