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How to Answer: If You Could Invest in One Stock, Which Stock Would it Be?

How to Answer: If You Could Invest in One Stock, Which Stock Would it Be?

Whether you’re interviewing for a finance internship or entry-level job, you will come across technical interview questions during the process. One popular question you’ll encounter when applying for a job in finance is, “If you could invest in one stock, which stock would it be?” The reason the interviewer asks this question is because they want to analyze your familiarity with the market and get a sense of your logic and reasoning skills.

Here are some things to keep in mind when preparing your answer.

Explain how you would pick the stock.

Even if you don’t have a preferred stock, you’ve likely discussed various stocks and their performance during economics classes or at a previous internship. In order to make sure that you give a comprehensive answer, pick a stock that reflects something about you. For example, if you have high risk tolerance, mention this and explain why it’s a key factor in your decision-making process.

Say something like: “I’m interested in growth because I’m young and my risk tolerance is higher. Companies that pay dividends don’t appeal to me because I don’t need the recurring income, as I have a job to pay my bills. I would rather see companies use money to fuel their growth in the short and long term.”

Pro Tip: When coming up with your answer, it’s important to keep in mind things like stability, growth and past performance. Although you may choose not to talk about these factors when giving your example, they’re likely to come up when the interviewer asks a follow-up question and knowing about them will show that you’re well-informed.

Give a solid reason for your choice.

Once you’ve outlined the factors you look for when picking a stock, explain how you arrived at your decision. It’s important to be specific and to give a sense of how this stock would fit into your overall portfolio. This will show the hiring manager that you’re not only aware of the current state of the market but that you also have long-term goals for your portfolio.

Say something like: “I’m specifically interested in tech, and Netflix recently reported their earnings. They beat estimates on revenue and earnings, but missed widely on new subscriber growth, sending the stock down 16%. I think this signals a great buying opportunity, as Netflix still has a large market to capture abroad, and these headwinds are a short-term issue. Overall, long term I feel the company is well positioned to significantly increase their growth and market share abroad. In conclusion, I wouldn’t want a single stock to be more than 3-5% of my overall portfolio, as it is not advisable to over invest in one specific equity, no matter how bullish I might be.”

Here’s how to bring it all together:

“I’m interested in growth because I’m young and my risk tolerance is higher. Companies that pay dividends don’t appeal to me because I don’t need the recurring income, as I have a job to pay my bills. I would rather see companies use that money to fuel their growth in the short and long term. If we’re looking at today, with all the uncertainty abroad, I would want to stick to a US-based stock, and I feel that with it being an election year, it has brought volatility into the market for opportunistic investments at specific times. I’m specifically interested in tech, and Netflix recently reported their earnings. They beat estimates on revenue and earnings, but missed widely on new subscriber growth, sending the stock down 16%. I think this signals a great buying opportunity, as Netflix still has a large market to capture abroad, and these headwinds are a short-term issue. Overall, long term I feel the company is well positioned to significantly increase their growth and market share abroad. In conclusion, I wouldn’t want a single stock to be more than 3-5% of my overall portfolio, as it is not advisable to over invest in one specific equity, no matter how bullish I might be.”

One key thing to remember is that there is no set response when it comes to determining which stock to invest in. What is important is picking a stock that you can stand behind and convincingly talking about the factors that influenced your decision. This is likely to impress the interviewer and get you one step closer to landing your dream job.

Next, get more career tips for internships and entry-level jobs such as How to Use a Blog to Apply for an Internship and find answers to common interview questions such as Tell Me About Yourself.

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