My Take On Investing In Single Stocks

Thousands of blogs and other websites are dedicated to investing, and I see so much emphasis on individual stocks and company news. My question is, when do these bloggers find the time to follow the stock market so closely? Well, some of them blog full-time and others just read a lot. I know a few people that invest in single stocks. They’ll keep a chunk of cash in Google, maybe some in Apple, and now I’m sure they’ll jump on the XM and Sirius merger. But what they don’t realize is that they are playing Russian roulette with their money. You might as well put your money on a single black jack hand in Vegas if you are going to invest thousands into a handful of stocks. If ONE thing goes wrong with the company, the economy, the political climate, or the safety of the country, then you can kiss your hard earned money good-bye.

The average person does not have the time to follow the stock market and each company’s news. Smart financial advisors give advice to the average citizen that encourages them to invest in mutual funds. Mutual funds take away the majority of the risk that goes into investing. You can definitely lose money while investing in mutual funds, but your money will be diversified over hundreds of stocks with good track records. Your fund manager has a plan with your money. If you want to have a stock broker or portfolio manager to pick hundreds of individual stocks for you, then go ahead, but why waste the time doing that when mutual funds do the same thing? Their track records are proven, and the expense is nominal compared to the service and work that goes into it.

My favorite mutual funds families are American, Vanguard, and American Century. Find a mutual funds family with a proven 10 year track record. If the funds are newer than 10 years old, I would look elsewhere. Pick a growth stock fund, an aggressive growth stock fund, an international fund, and either a balanced fund or a growth & income fund. My American Growth & Income fund earned over 10% last year in my 401(k) and it has averaged 12% over the last 10 years. Look for stocks like that and I promise that you will retire rich. If you are young, the two things you have going for you are time and income potential. Time is on your side with compound interest and your income potential will continue to increase which means you’ll continue to raise your savings percentage.

When picking an advisor or broker to sell you mutual funds, choose one by referral from a trusted source. It’s important to do so, and make sure that they are not just throwing anything at you. Do your research! You have to be the one in control of your money even if the advisor knows more than you about it. Get educated about investing money. I promise it will save your thousands in the future.

  • Penny Stock Plays

    In my view All Investors in stocks should own at the very least 10 stocks. And to really get some degree of safety 20 stocks. Its really really difficult to get adequate stock diversification unless you own at the least 20 stocks. Another rule to never break when investing in stocks never put more than 10% of your portfolio in one single stock.

  • Jim

    For those investors with little investing experience. I would always recommend Exchange Traded Funds or Closed End Funds instead of stocks.. Putting money in a single security regardless of how great its prospects seem is just to much of a risk for the novice. Go with a narrow sector exchange traded fund or closed end fund if you like the steel business or the nuclear business. Buy a basket of stocks in the area you like through a exchange traded fund that specializes in those type of stocks..That way Instead of having all of your money in one steel stock that could go out of business you will not be concentrating all your money in a single security.