There are some who say that there are safe stocks for investment. At IHM Financial, we have over twenty-five years of experience investing in stocks and do not recommend stocks for safety or income. All stocks have risk, and an investor can lose his entire investment when investing in stocks. Let’s take the case of Enron, a well-respected utility company; many investors purchased Enron stock because of its dividend and solid reputation. Enron had a model board of directors with significant ownership stakes and an expert audit committee. In its 2000 review of best corporate boards, Chief Executive included Enron among its five best boards. Enron was named “America’s Most Innovative Company” by Fortune for six consecutive years between 1996 and 2001. Before its scandal, Enron was respected for its sophisticated financial risk management tools.

Enron was one the largest companies in the US in mid-2000 when the stock was $90 per share. Just eighteen months later, the stock was selling for less than $1 per share. On December 2, 2001, Enron filed for bankruptcy under Chapter 11 of the US Bankruptcy Code. Enron’s $63.4 billion in assets made it the largest corporate bankruptcy in U.S. history until WorldCom’s bankruptcy the following year. Not even the best stock analyst on Wall Street could have seen this coming. Fraud perpetrated by Enron’s management concealed all signs of the gravity of the situation. So when someone comes to you with a “safe stock” to invest in, remember, ALL stocks have risk.

Many who invested in General Motors, WorldCom, Washington Mutual, Lehman Brothers, Chrysler LLC, Pacific Gas and Electric, Bank of New England Corp and Calpine Corp. most likely never imagined that they would lose their money when they invested in these seemingly solid companies that eventually filed for bankruptcy.

In spite of these risks, according to Ibbotson^® SBBI^® (Stocks, Bonds, Bills, and Inflation 1926–2015), stocks produce the best returns when compared to bonds, T-bills, and inflation. This is the primary reason why you need to partner up with a Registered Representative to discuss the risks and navigate through markets with a business partner when investing in stocks. There is no substitute for picking your stocks with the assistance of professional management. When you navigate the road to retirement, do you want to travel it alone?