The Best Stock?

Q What’s the best all-around stock? — L.D., online

AThere’s no single perfect stock, and if you’re going to invest in individual stocks, you’ll need to invest in more than one, anyway. Otherwise, you’ll have too many eggs in one basket — and even the sturdiest baskets can tip over. Remember that it used to be unthinkable that companies such as Sears, General Motors, Eastman Kodak and Texaco would ever go bankrupt.

That said, many companies make better investments than others, and blue chips in particular are well worth considering. A “blue chip” company is one that’s established and relatively stable, with a solid track record — and, very often, a dividend that’s increased regularly. Examples include Berkshire Hathaway, Johnson & Johnson, Microsoft, Nike, Walt Disney, Starbucks and the Home Depot.

There’s a strong argument that the best all-around investment for long-term investors is simply a low-fee broad-market index fund, as it will spread your money across gobs of blue chips and other stocks.

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Q If I invest in stocks via dividend reinvestment plans (“Drips”) or direct investing plans, do I need to keep all the paperwork? — S.W., Bremerton, Washington

AYup. Those plans can be great, letting you bypass brokerages and invest in companies directly, but you’ll need to keep good records — of your purchases, sales and reinvested dividends — for tax purposes.

It can be worth it, though: You can avoid brokerage commission costs when buying shares, invest small amounts at a time and have your dividends reinvested in additional stock; over time, that can turn into large sums.

Learn more about these investment plans at DirectInvesting.com, and read our “Complete Guide to Drip Investing” by searching for the term “Motley Fool drips” on Google.