These Investors Struck Gold Picking Stocks. Can You Do the Same?

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When the stock market came tumbling down in the Great Recession, many investors ran for the hills. Jim Wang, the founder of Wallet Hacks, had a different idea. He saw an opportunity in the low stock prices and bought shares in several companies including Southwest Airlines. That single stock investment returned 950 percent within 10 years of Jim's 2009 investment.

Common wisdom in the stock market today tells most investors to avoid individual stocks in favor of low-fee funds, but there are plenty of examples of investors hitting the jackpot on a single stock investment or a handful of good picks. While single stocks are riskier than a diverse portfolio, they also offer opportunities for a big payoff if your investment and timing are right. Here are some success stories — and the lessons you can learn from them.

The Single Stock Debate

While the stock market has been a popular investment option for a very long time, the way people invest is changing over time. Over the last few years, single stock investments have gone out of favor when compared to low-cost index funds. But many investors still stick with a portfolio of individual stocks.

Advocates for low-cost funds argue that investors are best off buying a diverse portfolio of stocks that emulates the market as a whole. Advocates for single stocks, on the other hand, appreciate the granular control of each investment and the portfolio as a whole. There is no right or wrong answer here — just what works best for your investment goals and risk tolerance.

Examples of Single Stock Investment Success

To show exactly how well some single stock investments pay off, here's a success story from an expert in the world of investing. Remember that every stock pick does not work out quite as well as it might have for the expert below below, but it is completely possible to strike it rich!

  • Julie Rains, a blogger at Investing to Thrive, advocates for investing in single stocks as part of a well-constructed portfolio. Julie invested $7,000 in California based computer graphics chip manufacturer Nvidia. That stock’s value increased ten times to over $95,000 after she purchased it, as NVDA achieved advancements in deep learning and software for the driverless car market.

Expect Offsetting Losses

Just because one investment was a breakout success does not mean every investment will perform well. Drawing on personal experience, I recently struck it rich with a small investment in Bitcoin. While not a single stock, Bitcoin investments have much of the same characteristics of investments in stocks. I invested a little over $100 and walked away with nearly $1,000, earning an 836 percent return.

However, not every investment I’ve made performed as well. In the past, I lost money on an investment in World Wrestling Entertainment and currently hold losses on Teva Pharmaceuticals and Wynn Resorts in my portfolio. When you add up my losses on Teva and Wynn when compared to my recent win with Bitcoin, I’m only up around $500. Some of the gain came out in the wash.

What Are Your Chances?

If you start buying single stocks, what are the odds you will have the same success as Jim Wang or Julie Rains? The somewhat frustrating answer is that it depends.

Every stock and every investment is a little different. Even two investments in the same company will not perform exactly the same unless they were purchased for the exact same market price, which is unlikely to happen.

The future performance of single stocks is based on many factors, including the company’s financial performance and overall economic and market conditions. A change in interest rates or unemployment is often enough to send stocks into a tizzy, and earnings announcements can have a major impact in the short-term as well.

To get the best results, focus on a long-term investment strategy. If you focus your investments in companies with a strong financial foundation and a proven business model, it is bound to go up over time. There is always a risk things will turn south, but much more so with a short-term horizon than a long one.

There are no guarantees in the stock market and single stock investments are riskier than investing in a diverse portfolio, but sometimes those single stocks work out great and offer an amazing return. When that happens, you’ve found the holy grail of the stock market.