Is It Ok To Buy Just 1 Stock?

Is It Ok To Buy Just 1 Stock? The stock market seems like a wild, mysterious place for those just starting out in the world of investing. There’s an entire language to learn, and it takes a lot of research to understand the meaning of words like “put,” “call,” and “margin.” 

Beginners often prefer to start small with a limited number of stocks in reliable companies that are easy to understand. Examples include well-known blue-chips like Coca-Cola, Disney, Goldman Sachs, Johnson & Johnson, McDonald’s, and Walmart. However, new investors don’t always have a lot of cash available to build a robust portfolio. In that case, is it okay to buy just one stock? 

What Does Diversification Mean In Investing? 

Education materials for newcomers to the stock market are quick to emphasize the downside of buying a single stock. Putting all of your funds into one company is dangerous because even the most reliable organizations can run into trouble. For example, no one expected the COVID-19 pandemic. When it hit, entire industries were decimated. 

Investors with stock in airlines like United Airlines and Delta lost a fortune, and hotel stocks like Hyatt, Hilton, and Marriott plummeted. Cruise lines, car rental companies, and other tourism-dependent businesses saw their stock prices drop, and even now, two years later, not all have fully recovered. 

Events like a pandemic cannot be predicted, and there are dozens of other reasons why individual companies or entire industries can be disrupted. Corporate mismanagement, fraud, regulatory changes, new technology, war, natural disasters, and extreme weather can impact stocks in unforeseen ways. 

The solution is diversification. In investing, that means holding a variety of stocks in your portfolio. If one stock goes down, returns from other stocks will keep your balance stable. Generally, well-diversified portfolios experience less volatility, reduced risk, and higher long-term growth. 

Diversification can be achieved in many ways, depending on the types of stocks that interest you and how worried you are about risk. For example, you can buy stock in companies of different sizes (e.g., small, medium, and large-cap), across industries (e.g., consumer staples, technology, and energy), and in different geographies (e.g., US companies, Latin American companies, and European companies). 

Of course, diversification isn’t always practical if you are just starting out as an investor. When you don’t have the resources to buy lots of different stocks, there are lower-risk options for buying stock in one company. 

Which Stock Is Best To Buy Now? 

Now that online brokerage firms allow you to buy stock without paying fees and commissions, you don’t have to come up with a lot of cash to start investing. It is ok to buy just one stock if you choose wisely. That means selecting a company that is steady, reliable, and likely to grow over time. 

Three of the most popular options for investors who are buying a single stock include companies like Apple, Google, and Berkshire Hathaway. While they don’t have much in common regarding their structure and product lines, they have important similarities that make them a good bet for safe, dependable growth. 

Is Apple Stock A Buy? 

Apple was founded in 1976 and went public in December 1980. Since then, shares have returned 277,760 percent. Apple is a massive company with a current market cap of $2.25 trillion.

That’s bigger than the gross domestic product (GDP) of some countries. In fact, on a list of the world’s largest economies, Apple would be in the top ten between number seven, France, at $2.63 trillion, and number eight, Italy, at $1.89 trillion.

It’s true that Apple’s growth has slowed. In the past five years, Apple stock has gone up around 285 percent. However, it remains a leading brand for mobile and smart devices, and the company invests in research and development to ensure it is the first to introduce the technologies of the future. That means Apple stock will likely continue rising, making it a smart buy for new investors. 

Will Google Stock Go Up?

Google, which is now part of the parent company Alphabet, is the largest search platform in the world. It holds more than 90 percent of the global market share when it comes to search engine traffic, and that puts it in a perfect position to dominate the online advertising market.

At this point, it has a competitive edge or “moat” that simply can’t be breached by other search engines and online advertising companies. However, a handful continues to try pulling consumers away from Google and onto their own platforms. 

In addition, parent company Alphabet has other business units that look promising in terms of boosting the company’s overall revenue.

Google Cloud is in the top three when it comes to cloud computing, and Google Services like Android, Google Maps, YouTube, and Chrome are all holding their own in their respective markets. Google continues to invest in new technologies ranging from health services and smart cities to autonomous vehicles. 

Google is also a giant company with a market cap of $1.44 trillion. Its free cash flow figures are particularly impressive, which means it can keep debt to a minimum and continue to invest in the company’s growth.

In short, Google (Alphabet) stock is likely to go up, especially over the long term, making Google a buy when you want just one stock. 

What Does Berkshire Hathaway Do? 

Berkshire Hathaway isn’t a tech company like Apple and Google, though it does own a substantial amount of Apple stock. It is a holding company controlled by the legendary Warren Buffett, a billionaire who has made investing his life’s work. 

As a holding company, Berkshire Hathaway doesn’t produce any goods and services on its own. Instead, it owns several subsidiaries, such as See’s Candy, Fruit of the Loom, and Dairy Queen, and it has an extensive stock portfolio. 

Berkshire Hathaway sells very expensive Class A shares, as well as more affordable Class B shares. Both types of shares give stockholders instant diversification because the Berkshire Hathaway portfolio is already quite diverse.

Better still, Berkshire Hathaway has an impressive amount of cash on hand, which is especially good when the economy is volatile. Berkshire Hathaway can afford to buy stock when prices drop, ensuring that shareholders enjoy more significant returns when those stocks recover. 

Given Berkshire Hathaway’s long history of success, it is likely that Berkshire Hathaway stock will go up over time. That makes Berkshire Hathaway stock a buy when you only want to purchase one stock. 

Are ETFs A Good Investment? 

If you aren’t sure whether you are comfortable buying just one stock, there is an alternative that allows you to own a diversified portfolio with a single share. Exchange-Traded Funds (ETFs) pool investors’ money together to create a diversified portfolio, and when you buy a share, you get exposure to all of the companies in that portfolio. 

ETFs don’t have excessive fees and commissions because they aren’t actively managed. Instead, fund managers match the portfolio to an underlying index, and the ETF’s returns mirror the rise and fall of that index. Investors can choose from ETFs that base their portfolios on large indexes like the S&P 500, or they can focus on a single goal, industry, or area of the market. 

There are ETFs dedicated to technology, energy, dividends, cryptocurrency, and just about anything else imaginable. However, if you plan to buy just one share, the broader options offer less risk. Good choices include the Vanguard S&P 500 ETF, the iShares Russell 1000 Growth ETF, and the Schwab U.S. Dividend Equity ETF. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.