Risk Versus Reward—Is This Stock Really Worth It?

Michael N. Kahn, CMT

Let’s look at what makes for a good stock trade. This is where the monetary potential of a stock is assessed, rather than just its paper prospects.

Think about the difference between doing cosmetic dental work on a child and on an adult. The child’s teeth will eventually fall out as the adult teeth grow in. Unless there is a significant health benefit to be gained, the dental “transaction” will not be worth the costs and possible discomfort. The same is true for a stock. Unless transactions costs and the risk for a loss are zero, you simply cannot buy every stock that looks good. You need to concentrate on the stocks that have the best chances to make money at an acceptable ...