Adding Individual Stocks Safely

Individual stocks can add interest and upside to a portfolio, as long as they stay the right size. Here is how to add them with limits, a reason for owning each one and a plan for when things go wrong.

Start with a reason

Before buying a stock, write one or two sentences on why you own it: what the business does, why it should grow and what would make you wrong. If you cannot explain it simply, you probably should not own it yet.

Know the business: what it sells, who buys it and how it makes money.

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The rest of this lesson, its chart examples and quiz are part of Investing School. Start free with Stock Market Fundamentals and the first lesson in every category.