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Trader Q&A: Should I Invest in Companies I Like?

Schwab’s Trading Services team discuss the pros and cons of investing in companies you are personally interested in.

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[Lou] Just because you like the company, just because you shop there, just because you wore their product or drink their drink doesn't mean you're going to go out and buy that company. It is a great starting point to do more research, whether you do fundamental research, technical research, or a combination of the two. At the end of the day, know why you're buying that stock. If you buy it for the long term, great. It's one sliver in a well-diversified portfolio and quit micromanaging it. If it's a trade, tell me where you're going to sell it. If you're wrong, you can't let that little loss turn into a big loss.

[John] Yeah, and the one thing about buying a company you're personally interested in is sometimes you don't want to admit when you're wrong because you love the company.

[Kevin] You took the words right out of my mouth, John. I think that's the one challenge you have to investigate a company where you have a lot of either belief or maybe a wardrobe full of it. That's one challenge for sure. I love the idea. As you're starting to familiarize yourself with the market, in an ideal world, yeah, you're going to do all your research first, but we know most of us are stepping into the market in a shoot first, ask questions later approach. 

And if you're going to go that way, do it with companies where you've got some familiarity. I know my wife in her first efforts was investing in Tiffany and Coach and I'm pretty sure she probably continues to maintain companies like that because they're companies she really loves and believes in generally. And I think that from a personal standpoint, there's a lot to be said for investing in companies that you believe in, but again, you've got to manage those challenges clearly.

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