Are there some stocks or industries that are Off Limits to your investing decisions? Probably there are some.
What is “Off Limits”?
In this context, Off Limits means that there may be some companies or industries you would not invest in, regardless of potential gains.
Why
There are many reasons why some companies or industries may find themselves on your Off Limits list. Of course, each individual investor may have their own list of areas they want to stay away from. Other have no hesitation to invest where they feel a good return is possible. Let’s look at ways of thinking about it.
Sometimes there are companies or industries you might consider so emotionally or psychologically untenable that you would not consider them.
Forward Looking
As much as an investor needs to assess their risk tolerance and their available resources when ready to invest, among other things an investor should be aware of what companies and industries fall outside of their comfort zone. Owning stocks means being a part owner in a business, and the question is: do you want to be a part owner of certain businesses?
What Might Be Some Things “Off Limits”?
Here is a random and incomplete list of industries that from time to time find themselves on some investors’ Off Limit lists:
– private prisons
– tobacco
– weapons manufacturers
– coal and related fossil fuel companies
and so on.
In other examples, funeral services and cemeteries will likely never run out of “customers”, and the demand seems infinite, but they are not something that I would like to be part owner of. Just because.
Other Things
There are other reasons one might eschew (a lovely word, isn’t it?) some businesses or industries. One might have diversification in mind. For example, if I realize I am overweighted in one particular industry segment, or one particular company, I might avoid adding to my position, or even cut back on it. In my case, while I do hold stock in some financial services firms, I do not wish to add to that group at present. This is a financial decision rather than a moral or emotional one, but the result is the same.
Amoral reasons
There are some industries that I avoid investing in just because I don’t expect much growth, dividend or otherwise. I feel aluminum manufacturers and ship builders fall into this category.
Or there is an opportunity for too much volatility. Retailers, and movie theaters, for example. You may be a different opinions.
What guides your decisions about which stocks are Off Limits? You can let me know here.
The drawing of a beast is from “Book of Hours” attributed to an artist of the Ghent-Bruges school and dating from the late 15th century. Courtesy Beinecke Rare Book & Manuscript Library at Yale University.
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