Opinions are Alexandra's own. This site is not affiliated with any of the companies or people mentioned or linked to. Information on this site is for educational purposes only and is not to be taken as specific advice. Speak with a financial professional to determine what is appropriate for your personal financial situation. ©2019 by Alexandra Wilson, CFP®

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Financial Impulse: How to Pick Companies to Invest In: 5 Tips

Written at the Financial Impulse

Financial Impulse reached out to me for my tips on how to pick companies to invest in.

Ask yourself these key questions

“Having a portion of your portfolio to invest in individual companies is a fun way to support companies you have an interest in,” says CFP and financial coach Alexandra Wilson. Of course, it also requires financial prudence.

When considering prospective companies to invest in, Wilson advises her clients to run through the following questions:

  1. How does this fit into your overall portfolio? 

  2. Are there special causes or interests you want to support?

  3. Is the company priced fairly? Is their price-to-earnings ratio in line with other companies in the industry?

  4. Are you willing to earn less of a return if this company is a special cause/interest?

  5. What do the company’s financials look like? Is their revenue and bottom line reasonable and sustainable?

  6. What is your exit strategy? Would you like to hold on to this long-term, or is there a price point that you would like to sell it at?

Use these questions as guideposts when making an investment decision. Wilson also recommends that investors diversify their portfolio by investing in “many companies and between stocks and bonds—best done through mutual funds or ETFs, and aligned with [their] goals and risk tolerance.”

Read the other tips at Financial Impulse

This article and quote is for education information only and not be taken as specific advice.