The Myth of a Cheap Stock
The other day I was chatting with my father about the stock market when he mentioned that he liked General Electric ($GE) because it was cheap. I cringed immediately. Every time I hear someone use “cheap” to describe a stock it takes every ounce of my being not to go into full rant. This is not the first time he has used this word nor is he the only one to use this word so freely (pun intended?).
The use of “cheap” as a descriptor seems innocent enough until you start to think about its actual meaning. Merriam-Webster defines cheap as any of the following:
- Charging or obtainable at a low price
- Purchasing below the going price or the real value
- Depreciated in value (as by currency inflation)
These three meanings are very different. In most conversations, I would assume that the average person implies the first or second meaning. However, the usage tends to be a bit implicit and ambiguous. Think about your last trip to a clothing store with a friend. Back in the pre-COVID days of normalcy. A conversation might go like this.
Jack: Woah. Jill, look at this jacket. It’s on sale for only $39.99.
Jill: Yeah, that is so cheap! You should totally buy it.
