Author Topic: Am I wrong to be invested in individual stocks?  (Read 19079 times)

steveo

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Re: Am I wrong to be invested in individual stocks?
« Reply #150 on: September 23, 2018, 08:56:48 PM »
If you consistently beat the market over time as an individual investor, you are either a genius (underpaid, since you should run a hedge fund), lucky, or you've miscalculated returns like the Beardstown ladies and actually underperformed.

Most people with such claims fall into groups 2 and 3.

Exactly.

Percolate

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Re: Am I wrong to be invested in individual stocks?
« Reply #151 on: September 25, 2018, 08:38:33 PM »
I view picking stocks as akin to picking the future.
I feel like this is true of any investment.

PaulMaxime

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Re: Am I wrong to be invested in individual stocks?
« Reply #152 on: September 26, 2018, 10:31:41 PM »
I view picking stocks as akin to picking the future.
I feel like this is true of any investment.

100% true. You are paying money now in expectation that it will pay you back more in the future. That's not guaranteed to anyone.

The Beacon

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Re: Am I wrong to be invested in individual stocks?
« Reply #153 on: September 30, 2018, 02:18:20 PM »
Nothing wrong active investing.  It is not because I believe I can beat the market consistently without lots of work. It is because I just like the challenge, have the time and desire to do it. Of course, I only risk 5-10 % of my capital to do it .  People who only want to become rich quickly through speculating in the market should stick with index funds or mutual funds.

DS

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Re: Am I wrong to be invested in individual stocks?
« Reply #154 on: October 01, 2018, 08:49:31 AM »
I view picking stocks as akin to picking the future.
I feel like this is true of any investment.

100% true. You are paying money now in expectation that it will pay you back more in the future. That's not guaranteed to anyone.

That's actually the theoretical stock price. "Expected value of future cash flow"

leebuckeye

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Re: Am I wrong to be invested in individual stocks?
« Reply #155 on: October 01, 2018, 08:08:52 PM »
So I will say this...I kept my money in CDs for about 5 years and stable funds.
I read dozens of books on value investing/stock picking at the local library. About 8 years ago I started investing.Picking companies that I believed were innovating and undervalued. For long periods my money sat in cash and then I would go all in.
I went Marvel (which got bought by Disney), Sprint, Clearwire, IBM and Nokia and AMD, Kroger. All of whom had some underlying technology or item undervalued. In total I had a roughly 30x rate of return in  8 years total (not sure what it is annually because it varies dramatically I only look at what I started with and where it is now). Yes roughly 30x (I am an engineer by training so this math is correct and not a calculation error). Some of it is luck some of it is recognizing trends. I will give an example. Look at GE or F or even FB or IBM. your average fund manager if the stock falls 15-20% must sell to maintain the balance of his portfolio/returns. So when the going gets bad due to some recent news the stock overreacts as virtually all fund managers pile on the selling. This is where the individual investor has a chance in my opinion by going against the grain. I can't beat computers at volume or day trading but I have time on my side. Average fund manager has to make a quarterly or annual report and can't risk a large component (FB, APPL, GE, IBM) falling dramatically so you get a chance. Case in point Amazon buys Whole Foods and Krogers falls like crazy within a few months it's up 50%. I believe there are some advantages that smaller money/individuals have if they are willing to do two things. Sit on their money waiting for an opportunity (this is much harder than it sounds). Go in for large percentages when the opportunity presents itself  because it doesn't present itself often. I have also been lucky I recognize that. I made a few bad investments but in all of those it was when I hadn't done enough research. The ones where I went all in I recognized that there was a lost opportunity cost but it doesn't matter. I bought AMD at $4 in 2014. It fell to $1.80. I kept adding and never sold. It went back up to 15 didn't sell went to 10 didn't sell and now it's at 30. I may sell as the thesis has changed but I never lost sleep over it. That said I kept maxing out a 401k in extended market funds for a while but I knew that the investments were sound --they had a moat or were disruptive. Once you do your research be firm in your convictions. Also do your research, and that can mean hanging out at JCP and Macys to see does anyone still shop here?, to reading everythign there is to know about them. You occasionally get a slight advantage that the big funds don't quite get and can make the trade a little in advance. I have missed out on some big deals (I followed a stock for a year trying to understand all the potential and risks behind it went from 6 to $60 in the next two years). Don't invest in a business if you don't understand all the risks in it.

Viking Thor

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Re: Am I wrong to be invested in individual stocks?
« Reply #156 on: October 01, 2018, 09:51:18 PM »
You are either trolling or delusional. The stocks that you mention would not have delivered anywhere near a 30x return in 8 years.

If you are going to make things up at least research some stocks that could have delivered that return and then claim you owned them.

Cache_Stash

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Re: Am I wrong to be invested in individual stocks?
« Reply #157 on: October 02, 2018, 06:28:00 AM »
So I will say this...I kept my money in CDs for about 5 years and stable funds.
I read dozens of books on value investing/stock picking at the local library. About 8 years ago I started investing.Picking companies that I believed were innovating and undervalued. For long periods my money sat in cash and then I would go all in.
I went Marvel (which got bought by Disney), Sprint, Clearwire, IBM and Nokia and AMD, Kroger. All of whom had some underlying technology or item undervalued. In total I had a roughly 30x rate of return in  8 years total (not sure what it is annually because it varies dramatically I only look at what I started with and where it is now). Yes roughly 30x (I am an engineer by training so this math is correct and not a calculation error). Some of it is luck some of it is recognizing trends. I will give an example. Look at GE or F or even FB or IBM. your average fund manager if the stock falls 15-20% must sell to maintain the balance of his portfolio/returns. So when the going gets bad due to some recent news the stock overreacts as virtually all fund managers pile on the selling. This is where the individual investor has a chance in my opinion by going against the grain. I can't beat computers at volume or day trading but I have time on my side. Average fund manager has to make a quarterly or annual report and can't risk a large component (FB, APPL, GE, IBM) falling dramatically so you get a chance. Case in point Amazon buys Whole Foods and Krogers falls like crazy within a few months it's up 50%. I believe there are some advantages that smaller money/individuals have if they are willing to do two things. Sit on their money waiting for an opportunity (this is much harder than it sounds). Go in for large percentages when the opportunity presents itself  because it doesn't present itself often. I have also been lucky I recognize that. I made a few bad investments but in all of those it was when I hadn't done enough research. The ones where I went all in I recognized that there was a lost opportunity cost but it doesn't matter. I bought AMD at $4 in 2014. It fell to $1.80. I kept adding and never sold. It went back up to 15 didn't sell went to 10 didn't sell and now it's at 30. I may sell as the thesis has changed but I never lost sleep over it. That said I kept maxing out a 401k in extended market funds for a while but I knew that the investments were sound --they had a moat or were disruptive. Once you do your research be firm in your convictions. Also do your research, and that can mean hanging out at JCP and Macys to see does anyone still shop here?, to reading everythign there is to know about them. You occasionally get a slight advantage that the big funds don't quite get and can make the trade a little in advance. I have missed out on some big deals (I followed a stock for a year trying to understand all the potential and risks behind it went from 6 to $60 in the next two years). Don't invest in a business if you don't understand all the risks in it.

I don't care about your 30X statement and whether or not it is true.  Your outline of of your method is similar to mine in a lot of respects.  Enough so, I believe you are doing well.

Dabnasty

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Re: Am I wrong to be invested in individual stocks?
« Reply #158 on: October 02, 2018, 10:11:12 AM »
So I will say this...I kept my money in CDs for about 5 years and stable funds.
I read dozens of books on value investing/stock picking at the local library. About 8 years ago I started investing.Picking companies that I believed were innovating and undervalued. For long periods my money sat in cash and then I would go all in.
I went Marvel (which got bought by Disney), Sprint, Clearwire, IBM and Nokia and AMD, Kroger. All of whom had some underlying technology or item undervalued. In total I had a roughly 30x rate of return in  8 years total (not sure what it is annually because it varies dramatically I only look at what I started with and where it is now). Yes roughly 30x (I am an engineer by training so this math is correct and not a calculation error). Some of it is luck some of it is recognizing trends. I will give an example. Look at GE or F or even FB or IBM. your average fund manager if the stock falls 15-20% must sell to maintain the balance of his portfolio/returns. So when the going gets bad due to some recent news the stock overreacts as virtually all fund managers pile on the selling. This is where the individual investor has a chance in my opinion by going against the grain. I can't beat computers at volume or day trading but I have time on my side. Average fund manager has to make a quarterly or annual report and can't risk a large component (FB, APPL, GE, IBM) falling dramatically so you get a chance. Case in point Amazon buys Whole Foods and Krogers falls like crazy within a few months it's up 50%. I believe there are some advantages that smaller money/individuals have if they are willing to do two things. Sit on their money waiting for an opportunity (this is much harder than it sounds). Go in for large percentages when the opportunity presents itself  because it doesn't present itself often. I have also been lucky I recognize that. I made a few bad investments but in all of those it was when I hadn't done enough research. The ones where I went all in I recognized that there was a lost opportunity cost but it doesn't matter. I bought AMD at $4 in 2014. It fell to $1.80. I kept adding and never sold. It went back up to 15 didn't sell went to 10 didn't sell and now it's at 30. I may sell as the thesis has changed but I never lost sleep over it. That said I kept maxing out a 401k in extended market funds for a while but I knew that the investments were sound --they had a moat or were disruptive. Once you do your research be firm in your convictions. Also do your research, and that can mean hanging out at JCP and Macys to see does anyone still shop here?, to reading everythign there is to know about them. You occasionally get a slight advantage that the big funds don't quite get and can make the trade a little in advance. I have missed out on some big deals (I followed a stock for a year trying to understand all the potential and risks behind it went from 6 to $60 in the next two years). Don't invest in a business if you don't understand all the risks in it.

I don't care about your 30X statement and whether or not it is true.  Your outline of of your method is similar to mine in a lot of respects.  Enough so, I believe you are doing well.

Translation: I don't care if you're lying, your claims back up my current beliefs. High five!

I'm not suggesting your method is wrong, but you might want to disregard leebuckeye's post as confirmation of it. Perhaps they can add some detail to clarify their rate of return?

wheezle

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Re: Am I wrong to be invested in individual stocks?
« Reply #159 on: October 02, 2018, 11:46:43 AM »
Simple:

The time spent picking stocks, even if it results in 100% outsized gains over ten years, is not EVER worth it. It's a complete, ridiculous waste of time. I cannot even imagine a net worth for which it would make sense to spend the time to do this.

It's a hobby that should not interfere in good decision-making.

Cache_Stash

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Re: Am I wrong to be invested in individual stocks?
« Reply #160 on: October 02, 2018, 12:32:37 PM »
So I will say this...I kept my money in CDs for about 5 years and stable funds.
I read dozens of books on value investing/stock picking at the local library. About 8 years ago I started investing.Picking companies that I believed were innovating and undervalued. For long periods my money sat in cash and then I would go all in.
I went Marvel (which got bought by Disney), Sprint, Clearwire, IBM and Nokia and AMD, Kroger. All of whom had some underlying technology or item undervalued. In total I had a roughly 30x rate of return in  8 years total (not sure what it is annually because it varies dramatically I only look at what I started with and where it is now). Yes roughly 30x (I am an engineer by training so this math is correct and not a calculation error). Some of it is luck some of it is recognizing trends. I will give an example. Look at GE or F or even FB or IBM. your average fund manager if the stock falls 15-20% must sell to maintain the balance of his portfolio/returns. So when the going gets bad due to some recent news the stock overreacts as virtually all fund managers pile on the selling. This is where the individual investor has a chance in my opinion by going against the grain. I can't beat computers at volume or day trading but I have time on my side. Average fund manager has to make a quarterly or annual report and can't risk a large component (FB, APPL, GE, IBM) falling dramatically so you get a chance. Case in point Amazon buys Whole Foods and Krogers falls like crazy within a few months it's up 50%. I believe there are some advantages that smaller money/individuals have if they are willing to do two things. Sit on their money waiting for an opportunity (this is much harder than it sounds). Go in for large percentages when the opportunity presents itself  because it doesn't present itself often. I have also been lucky I recognize that. I made a few bad investments but in all of those it was when I hadn't done enough research. The ones where I went all in I recognized that there was a lost opportunity cost but it doesn't matter. I bought AMD at $4 in 2014. It fell to $1.80. I kept adding and never sold. It went back up to 15 didn't sell went to 10 didn't sell and now it's at 30. I may sell as the thesis has changed but I never lost sleep over it. That said I kept maxing out a 401k in extended market funds for a while but I knew that the investments were sound --they had a moat or were disruptive. Once you do your research be firm in your convictions. Also do your research, and that can mean hanging out at JCP and Macys to see does anyone still shop here?, to reading everythign there is to know about them. You occasionally get a slight advantage that the big funds don't quite get and can make the trade a little in advance. I have missed out on some big deals (I followed a stock for a year trying to understand all the potential and risks behind it went from 6 to $60 in the next two years). Don't invest in a business if you don't understand all the risks in it.

I don't care about your 30X statement and whether or not it is true.  Your outline of of your method is similar to mine in a lot of respects.  Enough so, I believe you are doing well.

Translation: I don't care if you're lying, your claims back up my current beliefs. High five!

I'm not suggesting your method is wrong, but you might want to disregard leebuckeye's post as confirmation of it. Perhaps they can add some detail to clarify their rate of return?

You did a complete hack job an mischaracterized what I said showing your bias.  You can call my post confirmation bias or whatever.  I don't really care.e

Like I said, I don't care about whether it is 30X, 20X, 10x or whateverx.

Are you asking me to clarify?  How would I know?

Dabnasty

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Re: Am I wrong to be invested in individual stocks?
« Reply #161 on: October 03, 2018, 09:53:24 AM »
So I will say this...I kept my money in CDs for about 5 years and stable funds.
I read dozens of books on value investing/stock picking at the local library. About 8 years ago I started investing.Picking companies that I believed were innovating and undervalued. For long periods my money sat in cash and then I would go all in.
I went Marvel (which got bought by Disney), Sprint, Clearwire, IBM and Nokia and AMD, Kroger. All of whom had some underlying technology or item undervalued. In total I had a roughly 30x rate of return in  8 years total (not sure what it is annually because it varies dramatically I only look at what I started with and where it is now). Yes roughly 30x (I am an engineer by training so this math is correct and not a calculation error). Some of it is luck some of it is recognizing trends. I will give an example. Look at GE or F or even FB or IBM. your average fund manager if the stock falls 15-20% must sell to maintain the balance of his portfolio/returns. So when the going gets bad due to some recent news the stock overreacts as virtually all fund managers pile on the selling. This is where the individual investor has a chance in my opinion by going against the grain. I can't beat computers at volume or day trading but I have time on my side. Average fund manager has to make a quarterly or annual report and can't risk a large component (FB, APPL, GE, IBM) falling dramatically so you get a chance. Case in point Amazon buys Whole Foods and Krogers falls like crazy within a few months it's up 50%. I believe there are some advantages that smaller money/individuals have if they are willing to do two things. Sit on their money waiting for an opportunity (this is much harder than it sounds). Go in for large percentages when the opportunity presents itself  because it doesn't present itself often. I have also been lucky I recognize that. I made a few bad investments but in all of those it was when I hadn't done enough research. The ones where I went all in I recognized that there was a lost opportunity cost but it doesn't matter. I bought AMD at $4 in 2014. It fell to $1.80. I kept adding and never sold. It went back up to 15 didn't sell went to 10 didn't sell and now it's at 30. I may sell as the thesis has changed but I never lost sleep over it. That said I kept maxing out a 401k in extended market funds for a while but I knew that the investments were sound --they had a moat or were disruptive. Once you do your research be firm in your convictions. Also do your research, and that can mean hanging out at JCP and Macys to see does anyone still shop here?, to reading everythign there is to know about them. You occasionally get a slight advantage that the big funds don't quite get and can make the trade a little in advance. I have missed out on some big deals (I followed a stock for a year trying to understand all the potential and risks behind it went from 6 to $60 in the next two years). Don't invest in a business if you don't understand all the risks in it.

I don't care about your 30X statement and whether or not it is true.  Your outline of of your method is similar to mine in a lot of respects.  Enough so, I believe you are doing well.

Translation: I don't care if you're lying, your claims back up my current beliefs. High five!

I'm not suggesting your method is wrong, but you might want to disregard leebuckeye's post as confirmation of it. Perhaps they can add some detail to clarify their rate of return?

You did a complete hack job an mischaracterized what I said showing your bias.  You can call my post confirmation bias or whatever.  I don't really care.e

Like I said, I don't care about whether it is 30X, 20X, 10x or whateverx.

Are you asking me to clarify?  How would I know?

I really don't know enough to confidently argue the efficacy of the method and I don't have a dog in the fight. We all harbor some little bits of bias but I don't think I have much in this discussion.

All I'm pointing out is that you readily back up their method and likely (I'm making an assumption here) will use it to reinforce your confidence in the method despite the lack of evidence for their claims.

I'm not asking you to clarify, I'm asking leebuckeye. Someone called them out as a liar and I'm curious if they can show more detail.

PizzaSteve

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Re: Am I wrong to be invested in individual stocks?
« Reply #162 on: October 03, 2018, 10:10:30 AM »
I dont think it is wise to post financial details for strangers around the world, and hesitate to call anyone a liar, just because we may not believe people on the internet can pick sticks, a priori. 

With enough patience and at least 20 'bets' there is quite a decent chance that a well thought out portfolio, with 0 churn, no transaction fees and a few decades of patience could outperform indexing.  Even low cost ETFs have costs.  The data supports that the drag of marketing and transaction costs are what shrinks active fund performance, not a lack of smart research.  I get the skeptics about day trading and churning on advice from organizations like M Fool, as data suggests that fails more often than succeeds.

That said, its also likely the difference in your life style will be negligible.  Say you end up with 6M instead of 2M.  Your life is likely no different, hence the good advice to focus on your life and savings,  not chasing risk premium returns (this is also why I advise caution about advising using leverage for everyone).
« Last Edit: October 03, 2018, 06:44:12 PM by PizzaSteve »

Cache_Stash

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Re: Am I wrong to be invested in individual stocks?
« Reply #163 on: October 03, 2018, 03:29:08 PM »
So I will say this...I kept my money in CDs for about 5 years and stable funds.
I read dozens of books on value investing/stock picking at the local library. About 8 years ago I started investing.Picking companies that I believed were innovating and undervalued. For long periods my money sat in cash and then I would go all in.
I went Marvel (which got bought by Disney), Sprint, Clearwire, IBM and Nokia and AMD, Kroger. All of whom had some underlying technology or item undervalued. In total I had a roughly 30x rate of return in  8 years total (not sure what it is annually because it varies dramatically I only look at what I started with and where it is now). Yes roughly 30x (I am an engineer by training so this math is correct and not a calculation error). Some of it is luck some of it is recognizing trends. I will give an example. Look at GE or F or even FB or IBM. your average fund manager if the stock falls 15-20% must sell to maintain the balance of his portfolio/returns. So when the going gets bad due to some recent news the stock overreacts as virtually all fund managers pile on the selling. This is where the individual investor has a chance in my opinion by going against the grain. I can't beat computers at volume or day trading but I have time on my side. Average fund manager has to make a quarterly or annual report and can't risk a large component (FB, APPL, GE, IBM) falling dramatically so you get a chance. Case in point Amazon buys Whole Foods and Krogers falls like crazy within a few months it's up 50%. I believe there are some advantages that smaller money/individuals have if they are willing to do two things. Sit on their money waiting for an opportunity (this is much harder than it sounds). Go in for large percentages when the opportunity presents itself  because it doesn't present itself often. I have also been lucky I recognize that. I made a few bad investments but in all of those it was when I hadn't done enough research. The ones where I went all in I recognized that there was a lost opportunity cost but it doesn't matter. I bought AMD at $4 in 2014. It fell to $1.80. I kept adding and never sold. It went back up to 15 didn't sell went to 10 didn't sell and now it's at 30. I may sell as the thesis has changed but I never lost sleep over it. That said I kept maxing out a 401k in extended market funds for a while but I knew that the investments were sound --they had a moat or were disruptive. Once you do your research be firm in your convictions. Also do your research, and that can mean hanging out at JCP and Macys to see does anyone still shop here?, to reading everythign there is to know about them. You occasionally get a slight advantage that the big funds don't quite get and can make the trade a little in advance. I have missed out on some big deals (I followed a stock for a year trying to understand all the potential and risks behind it went from 6 to $60 in the next two years). Don't invest in a business if you don't understand all the risks in it.

I don't care about your 30X statement and whether or not it is true.  Your outline of of your method is similar to mine in a lot of respects.  Enough so, I believe you are doing well.

Translation: I don't care if you're lying, your claims back up my current beliefs. High five!

I'm not suggesting your method is wrong, but you might want to disregard leebuckeye's post as confirmation of it. Perhaps they can add some detail to clarify their rate of return?

You did a complete hack job an mischaracterized what I said showing your bias.  You can call my post confirmation bias or whatever.  I don't really care.e

Like I said, I don't care about whether it is 30X, 20X, 10x or whateverx.

Are you asking me to clarify?  How would I know?

I really don't know enough to confidently argue the efficacy of the method and I don't have a dog in the fight. We all harbor some little bits of bias but I don't think I have much in this discussion.

All I'm pointing out is that you readily back up their method and likely (I'm making an assumption here) will use it to reinforce your confidence in the method despite the lack of evidence for their claims.

I'm not asking you to clarify, I'm asking leebuckeye. Someone called them out as a liar and I'm curious if they can show more detail.

I didn't back up their method.  I only stated that the method was similar to mine. That's not backing up their method, I stated I believed they have had some success.  I will not use it to reinforce my method.  I only use the data I have to evolve my methods. 

You twist what others say on a whim, don't you?  You read, take it in and the regurgitate what you believe I'm saying and it's not even close.   That's your bias, not mine.


Viking Thor

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Re: Am I wrong to be invested in individual stocks?
« Reply #164 on: October 03, 2018, 08:02:32 PM »
Just to clarify i never said anyone is lying, I said trolling or delusional. I said this because the stocks referenced have not gone up anywhere near that much, so the only way to get 30x return would be to do something weird like buying heavily on margin. As an example IBM was.At 113 8 years ago and 153 now, that's actually very bad performance considering the S&P 500 has almost tripled during that time. Some of the other stocks have done well but nowhere near 30x return.

Trolling in my view would be exaggerating on purpose and delusional would be just not understanding your own performance. It's probably the later.

PaulMaxime

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Re: Am I wrong to be invested in individual stocks?
« Reply #165 on: October 03, 2018, 08:24:24 PM »
Simple:

The time spent picking stocks, even if it results in 100% outsized gains over ten years, is not EVER worth it. It's a complete, ridiculous waste of time. I cannot even imagine a net worth for which it would make sense to spend the time to do this.

It's a hobby that should not interfere in good decision-making.

Really? 100% extra gains over 10 years is doubling your returns. That's totally worth it - it might be the difference between FIRE in 10 years and having to work another 10. The difference is real money.

Even an extra 1% per year over an investing career is a lot of cash.

ian055

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Re: Am I wrong to be invested in individual stocks?
« Reply #166 on: October 05, 2018, 08:36:39 AM »
I think it's all personal preference and what you feel is best for you. I have about 25% of my portfolio in individual stocks. I started in individual stocks about 15 years ago and didn't know much about index funds. But I did have T Rowe funds as the core of my portfolio (I started there because Vanguard had too high of a minimum to start). But the last couple of years, I have since started to shift my money into Vanguard. The reason why I've stuck with individual stocks at 25% is because I have some solid companies that pay a nice dividend. I've held these for years. However, I do a little more speculating with part of that stock portfolio. I find that individual stocks keeps me more engaged and makes my work day more interesting.

SemiChemE

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Re: Am I wrong to be invested in individual stocks?
« Reply #167 on: October 05, 2018, 09:55:07 AM »
To the original question, "Are you wrong to be invested in individual stocks?"  Absolutely not, there are some great opportunities out there and if you have the means and the motivation, why not take advantage of it?  On the other hand, the original post indicates that you have little or no investment in index funds or any mutual funds.  That is a mistake in my opinion, since as stated in the original post, it is very difficult for any single individual to closely follow more than 7-8 companies. 

The bottom line, is that with only 7-8 companies, you are not very diversified, so a significant downturn or period of extended malaise in just a few of these stocks could have quite a negative impact on your overall returns, in which case, you would have been better off with an index fund.  Now, there's no question that there will be periods where a 7-8 company portfolio will beat the market.  The real question is whether your research and decision making is sufficient to avoid a major mistake for decades?   I think the answer to this question is that the odds are not in your favor.  Most market research tends to suggest that the odds of beating the market are on the order of 10% or less, however, mostly this applies to institutional investors.  I suspect a disciplined small investor can probably increase these odds, perhaps even to the 30-40% level, in which case you do have a significant chance of beating the market long term, but the odds are still against you.

Now having said that, I want to repeat that to me, it makes a lot of sense to keep a portion of investments in stocks and even higher risk investments.  I originally started investing in individual stocks through an Employee Purchase program at work, which gave extremely favorable terms.  At some point, about ten years ago, the IRS cracked down on such programs, so when I changed employers I enrolled in the new program, but the terms were only marginally favorable and I'm not sure I really beat the market with the stock from this second employer.

Finally, in 2012, I struck out on my own and invested in individual stocks.  Mostly, I picked banking stocks, as some had book values that far exceeded the share price and we seemed to be well into a recovery.  I also started learning about and investing in options.  I bought AMZN, which certainly didn't hurt, either.  My returns have been phenomenal:
             Portfolio        S&P500
2012:   64.8%             15.9%
2013:   67.3%             32.4%
2014:   24.2%             13.8%
2015:     6.3%               1.3%
2016:   -8.6%              11.9%
2017:   66.2%              21.9%
2018:   45.0%                9.3%

Now I'm under no illusion that I will be able to maintain such returns long-term.  There's no question that I have taken on significant risk and have been rewarded handsomely.  My approach to mitigating this risk is to remove a portion of the proceeds and roll it into index funds and bonds.  Also, as market conditions become less favorable, I will need to be more aggressive about unwinding some of these investments.   I particularly struggle with what to do with AMZN.  Last year, when it topped $1K/share, I unloaded ~40%.  In hindsight that was a mistake, although I would do it again just to reduce my market exposure.


Viking Thor

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Re: Am I wrong to be invested in individual stocks?
« Reply #168 on: October 05, 2018, 10:33:29 AM »
That's a very logical and measured description of why some people could benefit by having a portion of their portfolio in individual stocks.

You clearly understand the risks and that it's not easy to beat the market long term.

However I think not all individual stock investors have the same realization, not realizing the odds are against them outperforming over time or realizing the level of risk they are taking on. For this reason in my view its not a good idea for most people but maybe for a subset who are disciplined, smart, diversify, and put in the work.

wannabe-stache

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Re: Am I wrong to be invested in individual stocks?
« Reply #169 on: October 05, 2018, 02:02:07 PM »
I've been reading up on investing for the last 25 years.  I never had money in my 20's to invest.  I dabbled in the stock market in individual stocks back in early oughts and didn't fair too well but I learned a lot about stock selection.  I went into index funds from 2003 through 2006.  I then started picking stocks again in 2007.  I bought AAPl and GMCR as my main investments.  I abide by the thesis that it is impossible to follow more than 5-7 companies and therefore I don't normally hold over 7 or eight stocks.  (As Buffet says - "diversity is for protection against ignorant".)  I truly follow the companies and have valid reasons for owning them.  When those reasons evaporate - I sell.  I am normally vested about 70-95% in equities dependent upon market conditions.  No index funds, ETFs  bond funds or other investment vehicles.  Individual stocks only.  My CAGR from 2007 until end of last year is 21.5%.  I'm currently at 18.5% YTD.

Very little trading.  Investments comprise about 80% of my portfolio.

Am I wrong for doing this?

Do you think I will revert to the mean?

Is anyone else doing this?

I feel like I'm on an island sometimes.

BTW, Index ETFs are a great vehicle!  It is the best investment if you don't want to take the time to devote to DIY stock investments.  I would say 90% of the populace belongs in ETFs.

Updated to fix Warren's Quote (I knew I had it wrong and it read as such)

No you're not wrong, you are clearly a stock picking genius so stick with it.   Remember though,  there is a high chance you have just been lucky (do you really think you have more skill than highly trained professionals who you have outperformed? )

I have to say your method of "researching" GMCR is laughable and shows and incredibly worrying level of hubris.

i honestly hope he doesn't have children to provide for.  otherwise, this investing style is reckless.

Cache_Stash

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Re: Am I wrong to be invested in individual stocks?
« Reply #170 on: October 05, 2018, 03:51:27 PM »
I've been reading up on investing for the last 25 years.  I never had money in my 20's to invest.  I dabbled in the stock market in individual stocks back in early oughts and didn't fair too well but I learned a lot about stock selection.  I went into index funds from 2003 through 2006.  I then started picking stocks again in 2007.  I bought AAPl and GMCR as my main investments.  I abide by the thesis that it is impossible to follow more than 5-7 companies and therefore I don't normally hold over 7 or eight stocks.  (As Buffet says - "diversity is for protection against ignorant".)  I truly follow the companies and have valid reasons for owning them.  When those reasons evaporate - I sell.  I am normally vested about 70-95% in equities dependent upon market conditions.  No index funds, ETFs  bond funds or other investment vehicles.  Individual stocks only.  My CAGR from 2007 until end of last year is 21.5%.  I'm currently at 18.5% YTD.

Very little trading.  Investments comprise about 80% of my portfolio.

Am I wrong for doing this?

Do you think I will revert to the mean?

Is anyone else doing this?

I feel like I'm on an island sometimes.

BTW, Index ETFs are a great vehicle!  It is the best investment if you don't want to take the time to devote to DIY stock investments.  I would say 90% of the populace belongs in ETFs.

Updated to fix Warren's Quote (I knew I had it wrong and it read as such)

No you're not wrong, you are clearly a stock picking genius so stick with it.   Remember though,  there is a high chance you have just been lucky (do you really think you have more skill than highly trained professionals who you have outperformed? )

I have to say your method of "researching" GMCR is laughable and shows and incredibly worrying level of hubris.

i honestly hope he doesn't have children to provide for.  otherwise, this investing style is reckless.

Iím retired. Great children. Theyíre independent and havenít asked for a dime since they moved out over ten years ago.  Thanks for worrying about my family and me!

Goldielocks

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Re: Am I wrong to be invested in individual stocks?
« Reply #171 on: October 08, 2018, 04:05:44 AM »
30x return in 8 years is 53% annual return.

Perhaps the poster forgot to mention that this included annual contributions, too.

Picking stocks versus an ETF will get you either higher or lower returns than the ETF (or the index).   Buying an index is like buying the average.   Less Diversity = more changes to make larger returns, for increased volatility and risk of loss.

Note:
Less than 10% of Active managers, net of fees, beat their index over 10 years.   BUT 30% of them did it over a short timeframe, like 3 years.

 

ChpBstrd

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Re: Am I wrong to be invested in individual stocks?
« Reply #172 on: October 12, 2018, 03:48:50 PM »
I'm not sure what all the commotion is about. Modern Portfolio Theory came out decades ago, and basically says there is a linear relationship between risk and expected return. Build a high-risk portfolio comprised of hand-picked money-losing lotto-ticket stocks and you'll probably outperform the index. Either that or experience the difference high beta makes during a downturn.

Blueberries

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Re: Am I wrong to be invested in individual stocks?
« Reply #173 on: October 16, 2018, 09:20:27 AM »
Yes, you can pick individual stocks and beat the market; it requires a few psychological skills that you can learn and it requires a plan.  It isn't easy and it doesn't happen overnight, but it can be done.