This Was My Smartest Investing Move

Making this decision about my investments has paid off big-time. 

I'm not very good at picking stocks, nor am I interested in learning how to select companies to invest in. That's why I chose a brokerage firm that has many different exchange-traded funds available. With the ETFs my broker allows me to invest in, I can gain exposure to equities by buying an S&P 500 index fund that invests my money into around 500 large U.S. businesses. 

But while I don't invest in many individual stocks, I recognize that index investing won't allow me to beat the market and will limit my potential returns. Since I want to maximize the chances of earning lots of investment income to help my wealth grow, I want to buy some shares of companies that could perform well. 

The good news is, I devised a strategy for doing that which has really paid off. And adopting my approach ended up being the smartest investment move I ever made. 

Here's how I invest in companies

Although I don't invest often, I've done well with the investments that I have made. And I believe there's a simple reason for that. 

See, I buy stock in companies that I personally use, that I understand well, and that I believe have a competitive advantage based on my own personal experience with them.

If I use a product or service that I think stands apart from competitors because it's easier or more intuitive to use, more affordable, or otherwise superior in some measurable way, then I'll typically consider whether this perceived competitive advantage is one that other companies could easily replicate. If it's not, and if the features I like seem to provide a significantly better customer experience, then I'll often look into whether the company is publicly traded. If I discover that it is, I'll buy shares in it. 

Fortunately, it's become easier than ever for me to do this because of fractional shares and the elimination of commissions. I don't need to sink a lot of money into buying stock of a company just because I happen to like its product. I can simply decide how much money I'm comfortable investing and buy whatever number of full shares or partial shares I can afford with that amount. And I don't pay a commission for doing it.

Here's why this approach has paid off for me

Investing can be complicated, but it doesn't have to be. Most people get to know companies they do business with very well and often choose these companies wisely after doing a little research. If you understand whether a business has a competitive advantage and whether that advantage is likely to be sustainable, this can make a huge impact in the likelihood that the business will end up a success in the long run.

Now, if I was investing all or even most of my money in individual stocks, I would likely want -- and need -- to do more research. And if you're betting your whole financial future on buying shares in individual companies, then you'll likely want to take steps to become a smarter investor. 

But if you have a little extra money and want to try investing in a business you personally like, this decision could potentially end up working out well as it has done for me over time.