Our investment adviser recommends buying General Electric stock but a friend I admire says it has had a lackluster performance over the past decade or so. What do you think?
Terry Says: That’s an impossible question to answer out of context. First of all, past performance may be repeated, or not. So I would never buy a stock based on what it has, or hasn’t, done over a period of years. But that’s not the real issue here: I don’t know anything about your portfolio, your risk tolerance, etc. BUT I do know enough to ask who is this “investment advisor’? Is he/she a broker, aiming to make a commission? A registered investment advisor, handling your entire portfolio? A financial planner? I don’t comment on individual stocks — and I typically recommend that novice investors stick to no-load (no-commission) mutual funds that diversify your risk but give you overall exposure to the stock market, instead of trying to “pick” stocks. An example would be an S&P 500 stock index fund offered by every major mutual fund company such as Fidelity, Vanguard, T. Rowe Price, etc.