3 Legit Reasons I Like Investing in Individual Stocks

Paper Asset Investing Series: Post #5

This is the last post in my paper asset investing series (essentially stock market investing)! I hope they’ve been helpful in gaining a better understanding about investing in the stock market.

You can check out the other 4 posts here:

Post #4: 401k, IRA, Roth – Which Is Best For You?

Post #3: Understand and Reduce Your Investing Anxiety

Post #2: The Most Important Thing To Know Before You Ever Start Investing

Post #1: Top 5 Investing Terms to Help Beginner Investors Become Smarter Investors

Some people are afraid to buy stocks. I understand. It can be scary. I felt the same way before I bought my first stock. I kept thinking, what if I lose all my money or I choose the wrong stock and don’t make that great of a return or I buy at an all time high of the stock price. There’s all sorts of thoughts that run through our head when we are investing money.

But, if we take a step back and look at the positive side of investing, it helps give us a clearer picture. Today, I want to share the reasons I like investing in individual stocks.

Easy to buy

Individual stocks are easy to buy. All you need to do is set up an online brokerage account. (SIDE NOTE – You can put individual stocks into retirement accounts, like an IRA or Roth IRA, but for this post I’m discussing putting the stocks into your brokerage account.)

There’s plenty of options, I use CapitalOneInvesting.com, (feel free to use my referral link to get $50 if you’d like). There’s no minimums and their commission trade fee (the fee you’ll pay to place an order to buy or sell stocks) is on the lower end, at $6.95.

You don’t have to have a lot of money to buy stocks. You can find a good stock in your price range and purchase one share. You don’t have to invest $1,000 or $10,000 like when buying different mutual funds. It’s just the cost of the stock, plus your commission trade fee.

Investing in individual stocks on my own means I have full control over which stocks I buy or sell and when. Since I do it on my own, I am only paying the transaction fee to purchase or sell, there’s no other extra fees involved. It’s easy.

I choose which stock, how many I want and bam, I buy!

There’s no calling anyone and waiting to see if they are available. There’s no switching stocks around in different funds, they are just individual stocks I choose.

I don’t have to meet with anyone. I set up my account online and am ready to go.

Great return

Depending on of course, which stocks you buy and when and when you sell your return could be amazing or not so amazing.

If you’re choosing good stocks to buy and holding onto them for awhile, you can make a really good return. Overall, if I were to cash out my stock investments today, I would have a 50% gain. Tell me where else you can make 50% return on your investment in 3 years??… Just sayin.

Also, you can receive dividends on stocks, which is another added bonus. Dividends are a portion of the company’s earnings they pay to its shareholders (so if you own it, you’ll get paid a percentage of their earnings, usually quarterly, usually cash, but could be in the form of more stock).

Also, numerous studies have been done about comparing individual stocks to buying funds (like ETFs) with a variety of stocks in them and the individual stocks have usually outperformed the funds over a 5 year period.

For example, Apple (APPL) compared to 3 different ETFs (QQQ, IVW, VUG) that have Apple stock in each ETF over a 5 year period, the AAPL stock outperformed all 3 ETFs.

I know it doesn’t always work out this way and of course there’s always a risk, but it’s still something to acknowledge.

Also, you’ll pay taxes on any profit you make (capital gains), but if you hold the stock for longer than a year, the rate at which you’re taxed is lower. Paying taxes on individual stocks can be less expensive than paying a yearly fee on certain funds, it’s just something to keep in mind.

Cash out when you want

Buying individual stocks means you can cash them out whenever you want.

You want to hold them for 30 years, go for it. You want to hold them for a year, go for it. You’ll only pay the transaction fee any capital gains tax. There’s no ‘penalty’ for selling them early (when held in your brokerage account, not a retirement account). Like I mentioned above, it is usually better to hold them for at least a year to help the tax rate drop, but you’re not forced to hold them for a certain amount of time.

You do what you want when you want.

You don’t have to feel like you’re tied to making a long-term investment like with investing in a 401k or something more geared toward retirement.

Not only are stocks easy to buy, have potential for great returns, easy to sell, but buying individual stocks helps me feel in control of my investments – I choose what I want when I want it. And I think it’s fun. It’s fun to know I own part of some pretty amazing companies.

If you want to get started investing in individual stocks, check out my mini-course here: Buy Your First Stock.

What’s the first stock you want to buy?? Do tell in the comments below!

 

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