Advantages of Owning Individual Stocks
Today, there are multitudes of investment vehicles available to choose from. All of these vehicles carry specific advantages and/or disadvantages depending on what you, the investor, are comfortable owning. Since 1994, I have been helping clients choose investments and develop financial plans, where I have seen firsthand how owning individual stocks was crucial in helping my clients achieve their investment goals.
What are some of the reasons to consider investing in individual stocks?
- Professional Selection – The companies selected for your portfolio are researched and evaluated using database screening techniques & fundamental analysis.
- Diversification – Owning a diversified portfolio of stocks can give you a broad section of stocks in different sectors of the US Economy.
- Liquidity – Generally, individual stocks are liquid throughout the trading day.
- Stop Loss Features – Owning individual stocks can employ stop loss features for managing downside risk.
- Reinvestment Options – Dividends can be paid out in cash or can be reinvested back into your portfolio allowing your positions to potentially grow over time.
- Low Expenses – Generally investing in individual stocks has been cost efficient when looking at expenses.
- Buy and Hold Philosophy – This philosophy maintains that it is far better to purchase a well-chosen portfolio of securities and hold them for a period of time, rather than “playing the market.” This helps eliminate emotional investing and the temptation to buy and sell for various reasons that an investor cannot control (i.e. the volatility of the stock market, interest rates, inflation, and the overall economy, political elections, or the latest investment fad.)
- Fully Invested – Your money can be invested in the market potentially maximizing long term returns.
- Known Portfolio – Securities held in the portfolio generally remain fixed, giving you the comfort of knowing what you own.
- Rebalance – Ability to Rebalance the portfolio on a regular basis.
- Tax Control – No embedded capital gains.
Risk Considerations
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Past performance may not be indicative of future results. Dividends are not guaranteed and must be authorized by the company's board of directors. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Any opinions are those of Richard Hendry and not necessarily those of RJFS or Raymond James. Prior to making an investment decision, please consult your financial advisor about your individual situation. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including loss of principal. The process of rebalancing may carry tax consequences. Stop loss orders do not guarantee protection against a loss. In particular, during volatile market conditions, these orders may be executed at prices significantly below the "stop price" set.
