Reader Tony writes:

Gary,

Just wanted to ask about your philosphy when you talk about "making money". There can be different meanings to that little phrase.

My philosphy is that I feel it is better to make a 5% gain on a $100 stock than make a 10% gain(twice as much on a percentage basis ) on a $1 stock. In the first instance I make $500. In the 2nd I make $10 using 100 shares as the purchase. I gather from some of your email answers that you favor percentages. Appreciate any comment?

Tony, I don’t favor percentages over any other method, although I do use it as a basis for my trading.  However, my overriding philosophy is straightforward: I like to have the greatest return on equity I can. 

In your example, however, it’s not so much the percentage gain on the stock, but the percentage gain on the total amount invested that’s the real key.  That is, if you had $500 to spend, you’d buy 5 shares of the first stock, yielding a $25 gain.  In the second, case, you’d buy 500 shares, yielding a $50 gain.  All other things being equal, I’d prefer the latter!