ETFs and index fund investing is all the rage. It’s simple, easy, and yields a pretty good return (on average). Because of this, many people completely discount the idea of buying and holding individual shares in specific companies. And that’s a big mistake, as you’ll see in today’s article about the benefits of stock picking.

That’s right, today you’re about to learn why it’s smart to buy and hold a few key companies. And, you’ll discover how this can massively improve your investment gains over time.

Let’s dive in.

1. Stock Picking Allows You To Buy Underdogs

This is how Warren Buffett makes his money. By looking at balance sheets or analyzing great companies, you can actually find when their stocks are undervalued.

This means you’re buying a bigger stake in the business than the share price indicates.

For example, a company’s stock might sell for $10, when the business is actually worth $15 per share. This means you’re instantly making an extra $5 on every share you buy while the price is low.

Stock picking like Warren Buffett is a skill and it takes practice, but it is something you can master. And when you do, your profits become enormous.

2. Single Shares Split

(Hormel 10-Year Growth With Splits – Source)

Many stocks split their shares in order to keep prices reasonable. And when they do this, you’re doubling (or even tripling) your shares. This is fantastic, because good companies consistently grew their market cap. And as such, your shares will recover in value, helping you multiply your money.

Many companies which practice share splitting beat the market long-term. Businesses like Apple, Hormel, Microsoft, and Coca-Cola all practice share splits and all preform incredibly well.

ETFs and index funds don’t do this. So if youre interested in capitalizing off share splits, you’re going to have to do a little stock picking.

3. Certain Stocks Offer Shareholder Perks

Buying individual companies will often provide you with unique perks and benefits. Some businesses will offer free perks (like discounts on insurance or gift certificates), while others actually reduce their stock prices if you buy shares directly through them.

These special programs will often save you anywhere from 5 – 10% on a stock’s price, giving you an immediate gain over the market.

Berkshire Hathaway, York Water, Churchill Downs, McDonald’s, and many other great blue chip businesses offer exclusive perks and benefits that you can’t get through an ETF or index fund.

Closing Thoughts

Single stock picking gets a lot of hate. Naysayers drag out the old examples of Enron or Pets.com as “proof” that this system can’t work. In reality, these examples are few and far between. There are many great companies with long-term track records that are well worth owning.

Additionally, you don’t have to sink all your funds into single stock investments. Mixing individual picks with ETFs is a perfectly fine strategy that works for many people.

If you’re a buy and hold investor who is looking for quality companies at a fair price, give stock picking a try. The results may surprise you.

P.S. Looking for the easiest way to buy and hold single stocks? Check out the Robinhood App. It lets you invest in thousands of companies, ETFs, and bond funds… All without ever charging a commission. Best of all, you’ll get a free stock when you sign up through this referral link.