What’s a Great Stock to Buy Now?
I get this question a lot when people I meet hear that I am in wealth management. No doubt they are expecting me to reply with a name such as Apple, Amazon, Tesla or the hot stock du jour. My typical reply, anticlimactic though it is, usually sounds something like this:
“It depends. What purpose will that stock play in your investment strategy? How will it contribute to the desired characteristics of your full investment portfolio?”
This is usually when the puzzled or disappointed looks begin to surface. What they don’t understand is that their question is not dissimilar to asking a handyman what tool he would recommend without first knowing the desired task to complete. There is inherently, no best tool. The value of any tool – hammer, drill, screwdriver, or saw – is entirely dependent on the nature of the job that needs to be done.
All financial instruments are in essence only tools. They are the means to an end. No financial product (stocks, bonds, mutual funds, annuities, insurance, etc.) is intended to be a means unto itself. Consequently, any discussion of financial products should begin with an understanding of ones needs, circumstances, and goals. The specific financial tools chosen and the assets allocated to those tools should be a direct product of thoughtful consideration of the objectives to be accomplished.
So, what is a great stock to buy now? My first question is whether or not you should even own stocks. New investors or those with limited capital are often better off in mutual funds or exchange-traded funds (ETFs) due to the benefits of diversification. If stocks are appropriate for you, what sort of stocks do you need? Stocks with high growth characteristics? Blue Chip companies that boast characteristics like quality and reliability? Or perhaps your intentions are to purely generate income in which case you likely need a dividend yield portfolio.
Furthermore, what else do you own? Just because Apple stock may be a good buy for many investors, if the rest of your portfolio is concentrated in technology companies, a better stock for you may be one that diversifies your portfolio with exposure to a different industry or sector.
This concept leads to a second point. Financial instruments should not be viewed as stand-alone entities. They should be viewed in aggregate as a comprehensive package or portfolio.
Is your entire balance sheet (investment accounts, insurance, home, etc.) set up properly to address your specific goals? Are you using a hammer where a saw would be a much better option? These are questions that should be answered before thinking about the merits of any specific stock. At Buckhead Capital our thorough and thoughtful approach to aligning financial objectives with your unique investment strategy may be that one tool you do need.
