A couple weeks ago my aunt, who I’m very close with, went to California to visit with a family member. She called me during her trip excited about all of the information she was learning about choosing individual stocks.
The family member that she visited is retired and buys and sells individual stocks as a hobby. And, apparently she does pretty well.
My aunt got back home Friday with books and pamphlets that she was excited to share with me. We met up Saturday and started going through the information and before I knew it we were speculating on what stocks to buy.
We spent hours brainstorming and researching different companies. Finally, we narrowed down three companies whose stocks we wanted to purchase. I transferred a few hundred dollars to my Share Builder account and set it up to purchase the stocks.
My Criteria for Choosing Individual Stocks
I want to start by saying that we did not buy these stocks with retirement in mind. This was purely for fun. I know that buying individual stocks is a gamble but let’s be real, investing anything in the stock market is a gamble. And, for that matter so are most forms of insurance: there’s just a higher probability that it’s going to be something that you use.
I also want to point out that we were leaning toward high risk stocks. We weren’t investing a lot of money and since this was for fun we veered from anything we felt was too safe.
So with that out of the way here’s how we chose our stocks.
We Started with Companies We Know (And Like)
We started our list by thinking of products that we use on a regular basis. And, since she and I are very different there weren’t many commonalities on our list.
After we had our lists of companies we knew and liked we started researching them. We looked at past performance and expected growth. If a company’s value look like it had hit a plateau we crossed it off the list.
We Thought About Trends
After coming up with the companies we liked we then thought about up and coming products or companies that we think will have strong future growth.
We weren’t looking for fads, but companies or products that may be just launching and that we think will be here to stay.
We made a list. Surprisingly we agreed on many things when coming up with our trends list.
After we had narrowed down our choices to just a few we researched. We read about the company from various sources, looked at financial statements, and then……………
We went with our gut feeling.
Yep, we gambled with our money. However, it sure beats the heck out of stepping foot in a casino or buying scratch off tickets….
In all seriousness, investing in the stock market is always going to be a gamble. Buying individual stocks is just a bigger gamble than investing in an index fund.
However, I do think that taking a few hundred dollars and picking a couple stocks is a great way to get your feet wet. Maybe we’ll get lucky and make a few bucks. Or, maybe we’ll lose our money.
Either way it’ll be a learning experience.
Do you buy individual stocks? If so what criteria do you use to choose stocks?
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