Go B.I.G. or Go Home

Hey guys, are you ready for some money rehab?

Wall Street has been completely upended by an unlikely player.

GameStop.

Mean, and should I have a 401k?

Because then I can do it.

No, I never.

You think the whole world revolves around you and your money?

Well, it doesn't.

Charge for wasting our time.

I will take a check like a roll stick.

You recognize her from anchoring on CNN, CNBC, and Bloomberg.

The only financial expert you don't need a dictionary to understand.

The cold lap in.

Last week, we talked a bit about technical analysis for evaluating which stocks are winners.

But choosing investments isn't all about numbers.

You'll also need to do a little soul searching in order to figure out which is the best investment strategy for you.

You're going to need to ask yourself, self, what do you, I, we, want?

Yes, these are the kind of existential questions investors need to ask themselves before jumping into the market.

So, what do you want?

Are you looking for a bigger nest egg for retirement?

Are you looking to fund a project you foresee happening 10 years down the line to buy your first home?

Are you looking to turn investing into an income stream?

Your answers to these questions can and should impact your investment strategy.

Specifically, how you decide to invest in companies known as value stocks versus companies known as growth stocks or funds including value stocks or growth stocks.

Growth stocks are companies that investors feel have a lot of promise to grow.

Duh.

But because of that, growth companies may not be making a lot of money just yet.

Typically, when a company is on a growth trajectory, it may not be earning a lot of money right now, this very second, but investors aren't investing in the company for what is in the now.

Investors are investing in what they think the company will become.

What that also means is that the company may not yet have proven itself to be super profitable.

Because of that, growth stocks tend to be considered higher risk, but also higher reward.

If investors are right and the company grows into a big player, they'll of course reap the rewards.

If investors are wrong, though, and the company crumbles, they could lose it all.

Growth stocks tend to be new companies and/or in the tech sector.

Value stocks are companies that do show consistent earnings and have shown themselves to be profitable.

In contrast to growth stocks, value stocks tend to be older companies and/or companies that exist in really stable markets.

But stability is a double-edged sword here.

Although it means lower risk of dramatic losses, it also means lower chance of exciting dramatic gains.

Whether you want to go for a slow and steady strategy or or a higher risk, high reward strategy is totally up to you and your goals, and of course, your risk tolerance.

There's another type of investment that you should know about that I'd argue falls under the value stock umbrella.

And surprise, surprise, I have an embarrassing story about this investment.

Once upon a time at a conference, I was eavesdropping on someone talking about, quote, blue chip companies.

I thought to myself, self, are there really that many companies that sell blue blue chips?

Why are we making such a big deal about it?

Are blue chips even really that good?

Later, of course, I learned that blue chip was a term used to describe a certain group of companies, not literally companies that make blue tortilla chips.

There are three things you can tell about me from this story.

One, I really did learn all of this stuff in the School of Hard Knocks.

Two, I am not a big poker player.

And three,

I love snacks.

If I was a gambler, this term would probably have made more sense to me at the time.

What I'm told is that blue chips are the big bosses of the poker table.

They're worth the most moolah.

Same in the stock world.

Kind of.

Not only are blue chip companies considered high value, they also have a good reputation as a solid investment.

I mean, as solid as any investment can be, with a history of high performance.

Most stocks included in the DAO index, for instance, would be considered blue chip.

So like Microsoft, Walmart, Apple.

That's why I argue that blue chip companies fall under that value stock umbrella.

For today's tip, you can take straight to the bank.

When you do make your investment plan, think big.

And when I say big, I mean BIG, which is my acronym cheat sheet for a good diversified portfolio.

Blue chip companies being the B, index funds being the I, and growth stocks being the G.

Depending on your risk tolerance and your goals, you can decide what mix of these stocks and funds work best for you.

But a combination of all three in some way or another is a mix that is sure to grant you the kind of diversified portfolio that protects you from big risk and moves you along the road to financial freedom.

Spend our money, money, money.

Money Rehab is a production of iHeartRadio.

I'm your host, Nicole Lapin.

Our producers are Morgan Lavoie and Mike Coscarelli.

Executive producers are Nikki etor and Will Pearson.

Our mascots are Penny and Mimsy.

Huge thanks to OG Money Rehab team Michelle Lance for her development work, Catherine Law for her production and writing magic, and Brandon Dicker for his editing, engineering, and sound design.

And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.