Individual stocks have caused people to have great success. They have also caused financial deterioration! There are several things to consider when deciding on purchasing an individual stock.
We feel there are three things people are not thinking about when buying individual stocks:
- You get emotionally attached. – Your day-to-day mood becomes directly affected by the stock’s performance that day. When it’s up, you’re so happy, but, when it’s down, your mood is down, too.
- You have the Financial Order of Operations out of order! – By purchasing individual stocks, you are putting all of your eggs in one basket. You are focusing on the “get rich quick” rather than building wealth. The Financial Order of Operations (FOO) teaches nine tried-and-true steps that help you maximize your money and get on solid financial footing before trying individual stocks.
- Success can still ruin you. – Let’s say you buy an individual stock and you are right! If you double your money and sell, it’s a win! Right? What if the stock continues to go up after? The ideas of “what could have been” and “what might happen” can spur on overly risky behavior or continue to haunt you forever.
To be successful with individual stocks, you have to get it right when you buy and get it right when you sell!
When considering buying an individual stock, you should first review your UFO!
Keep in mind, our typical rule of thumb is that on positions of an individual company stock should not exceed 5% of your liquid investment portfolio.
U – Understand Your Planning Needs. Age, goals, risk tolerance.
F – Foundations – you’ve got to make sure you’ve built a base level of assets first.
O – Order of Operations. – Once you’re several steps into the FOO, you’re maxing out retirement savings, and your army of dollar bills are working for you, then you can consider investing in individual stocks you are interested in.
Before you put all of your money in individual stocks or the latest investment trend, make sure your financial life is protected. Follow the FOO in order to get your savings to a healthy place, take advantage of free money, and build wealth using the money you have now!
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