Traders should never get caught up on the notion that buying more shares of a “cheap” stock is preferable to buying fewer shares of a higher-priced, “expensive” stock.

My first mentor when I started in the investment business back in the early 1990s was William J. O’Neil, founder and publisher of Investor’s Business Daily. I learned a great many things from this market genius while working at the newspaper. One of the lessons that really stuck with me over the course of my career is what the man once told me about inexpensive stocks. He said, “Jim, you know cheap stocks are cheap for a reason.”

What he meant by this is that the reason why some stocks are selling at such a low price is because the collective wisdom of the investing public has deemed them less desirable to own. Conversely, so-called “expensive” stocks have become that way because investors have voted with their dollars and elected those stocks into high-priced office.

O’Neil’s equity selection strategy recommended investors buy when a stock was at or near new 52-week high territory. Certainly, that’s part of a formula that’s made many investors wealthy over the years. And while I do not think it’s necessary to buy stocks exclusively when they are at or near new highs in order to make great trading profits, I do think that avoiding a stock because of this fact is a huge mistake. It’s also a major mistake to shun stocks just because they trade at a high price, say above $100 per share.

Later in my career as a broker with Morgan Stanley, I had clients who told me they didn’t want to buy a stock because it was “too expensive,” and by that they meant it was trading at a price where they could only buy a limited number of shares. These investors were operating under the false notion that just because you have more shares of a certain company at a low price, that this will somehow translate into bigger upside potential in the position.

In trying to disabuse clients of this notion, I always pulled out my O’Neil card, and told them that cheap stocks are cheap for a reason. Once I explained why, they always caught on. Unfortunately, I’ve spoken with a lot of investors who still harbor the misconception that cheap stocks are great because you can buy more of the shares.

To this I say, which would you rather have, four beaten-up jalopies, or one brand new turbo Porsche? I’d venture to say that most sane folk would opt for the new Porsche, as it’s much more valuable, much more reliable and capable of delivering a lot more performance than those four beaters. So, why should it be any different when it comes to your trading portfolio?

Wouldn’t you rather own an “expensive” stock like Apple Inc. (NASDAQ: AAPL), which currently trades at about $350 per share, which has given investors an incredible 400% return over the past five years, than some “cheap” sub-$10 stock you bought that hasn’t gone anywhere?

Of course, the answer is clearly, yes; however, you’d be surprised at the large number of my colleagues who’ve told me they don’t want to buy Apple because it’s “too expensive.” One of those colleagues told me that back in October 2010 when Apple first hit a new 52-week high of $200.

The moral of the story here is that traders should never get caught up on the notion that buying more shares of a “cheap” stock is preferable to buying fewer shares of a higher-priced, “expensive” stock. Remember that cheap stocks are cheap for a reason — and expensive stocks are expensive for a reason.