Top 3 Stocks

Top 3 Stocks for Every Type of Investor

rankings and lists Sep 13, 2021

Every day we often get questions from all of you regarding what stocks to invest in. Our immediate answer usually comes in the form of a few questions. Those questions are:

1) What are your goals? Are your goals to make as much money as possible? Is it to have a steady stream of income? Is it to preserve your capital? Is it somewhere in between? What we are trying to understand here is what is your optimal goal so we can make the right recommendation. What investors often do not understand is everyone has different goals and therefore the right investment for one person may not be the right investment for another. If someone wants to make a ton of money we may recommend a risky investment whereas if someone wants a riskless investment we will recommend them something else! There is no one size fits all answer here!

The second question we often ask is what is your risk tolerance? Can you tolerate the ups and downs associated with certain investments? Or do you prefer something that is less volatile? If the investment was to not work out, could you tolerate losses? When we ask this question we often are trying to understand how much risk you can tolerate and if the answer clashes with the first question above. If an investor has goals of big gains but cannot tolerate risk, then risky investments that have large upside may actually not be for them! This point is very key here. More risk = more potential gains but also comes at the expense of potential larger losses.

The third question we often ask is what is your time horizon? Do you want this investment to make you money tomorrow or can you afford to wait over a year? The reason we ask this is because all investments behave different. Generally speaking, for more speculative investments, often only over the course of a long time, can we as investors, truly know if the investment will pan out. Whereas for investors with shorter time horizons, the investment then skews more towards the spectrum of "betting" rather than a true investment.

Long story short, until we understand who you are as an investor, it is inappropriate to make the right recommendation for you. But after understanding who you are, we then can make the right recommendation for you. And so with that introduction, we are giving our 3 favorite stock picks for the most common types of investors we run into.

Using the picture below, let's construct three types of investors and what types of investments they should be investing in.

 

Investor 1 Profile:

Long time horizon, can tolerate risk, wants their investments to make significant gains: This is a common type of investor we run into. The investor who has time on their side (is generally younger), can tolerate the daily volatility of an investment and wants to make money over the longer term. While there is no "best profile" it often is the easiest for the investor to see upside, while minimizing risk, over the long term. For these types of investors, we often recommend growth type investments. Please note that these investments are very long term in nature (2-3 years plus)! And for this investor, these are our favorite growth 3 stocks for them!

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