How to Decide Whether You Should Buy a Stock

You get a hot tip about a potential new investment, but you have to assess whether it's a good company or a good stock.

Editor's Note: Harold Evensky has been a practicing financial planner for more than three decades. In his book, Hello Harold, he shares the expertise he's acquired during that time and gives you the foundation you need to navigate the markets and plan your financial future. Below is an excerpt from his book, the entirety of which you can download from Amazon for free from April 17 through April 21; otherwise, it costs $2.99.

If you're managing your own portfolio, there are temptations that can lead you astray and cause you to veer away from the investment strategy you've settled on, and cost you a lot of money. For example: sooner or later you're bound to hear a story about a company that's headed for success—a great investment. The tip may come from a friend, a neighbor, an article you've read or even a new acquaintance at a bar. And if you have some funds available, it's awfully tempting to think about investing in your new find.

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Harold Evensky, CFP®
Chairman, Evensky and Katz

Harold Evensky, CFP® is Chairman of Evensky & Katz, a fee-only investment advisory firm and Professor of Practice in the Personal Financial Planning Department at Texas Tech University. Evensky served as Chair of the TIAA-CREF Institute Advisor Board, Chair of the CFP Board of Governors and the International CFP Council. He is on the advisory board of the Journal of Retirement Planning and is the Research Columnist for Journal of Financial Planning. Evensky is co-author of The New Wealth Management and co-editor of The Investment Think Tank and Retirement Income Redesigned. Mr. Evensky has received numerous awards over the years. The most recent is Investment Advisor Magazine, 2015 IA 35 for 35 recognizing the advisor advocates, investors, politicians and thought leaders have stood out over the past 35 years and will influence financial services for decades to come. Don Phillips of Morningstar called Mr. Evensky the dean of financial planning in America.