Many people who work for a publicly traded company like to invest some of their money in stock issued by their employer. It is obviously not a good idea to invest everything you have in your company since you already rely on them for your paycheck too (just ask all the former Enron employees who lost their retirement nest egg).
But keeping a small percentage of your portfolio in company stock may be a wise investment choice, especially if you really believe in their long-term prospects.
But why stop only with the company you work for? If you’re looking for other companies to invest in, why not take a look at the companies whose products and services you use on a day in and day out basis? After all, you’re obviously familiar with their products and happy to use them. Odds are other people feel the same.
Of course, just because you use a product doesn’t guarantee the manufacturer is a good investment. But it’s a good place to start if you are looking for companies to invest in and you’re not sure where to start your research.
To find companies that may be worth investing in, just pay attention throughout the day. For example, let’s say it is a sunny Saturday morning and you’re going to take advantage of the nice weather to get some things done around your house.
You hop into your Ford car and drive off to Home Depot to pick up some supplies. On the way home you stop at McDonalds for lunch and enjoy a Big Mac with a large Coke. Finally, you swing by the Exxon station to get some gas before heading home.
Just like that you’ve found five companies (Ford, Home Depot, McDonalds, Coca Cola, and Exxon) to invest in. Please note that I’m not a financial advisor and I’m not actually suggesting you invest in any of those companies, I’m just using them as an example.
Forming Your Investing Strategy
Once you come up with a list of potential companies to invest in you can dig down a little deeper and see if they fit your own personal criteria. Read up on them and take a look at their history.
Also consider what kind of stocks you prefer to own. Are you looking for high-flying tech stocks with tremendous growth potential? Typically these types of stocks are extremely volatile and you may feel like you’re on a roller coaster as the price rises and falls. They have the potential to make you rich very quickly, but they could just as easily crash and burn.
On the other hand, you have older and more stable stocks like Coke, Johnson & Johnson, and ADP. These are examples of Dividend Artisocrats, a list of companies with a long history of not just paying out regular dividends to their shareholders but also increasing them year after year. These companies are typically more mature and less volatile than the market as a whole. And while they may not have the same explosive growth potential, the regular dividend payments offer a valuable stream of passive income.
What do you think about investing in individual stocks? What kinds of companies do you prefer?