Buying individual stocks?

[TheAnonOne]

Anyone here own singular companies? I would like to get into it for fun with a small amount of my portfolio 1-5%

If you do, what broker do you use, and what costs are involved?

[coppertop]

I do; I have one particular stock, and it is doing very well.  I buy on line from Computershare.

[Keekster]

I use Robinhood on my phone, no trading fees!

[protostache]

This question might be better in Investor Alley, for what it's worth.

My family holds about 50% of our portfolio in individual positions. We intend to hold them for many years and continue growing them (in fact our IPS says we can't sell for 5 years after opening a position.) We hold them at Vanguard ($7 per trade) and Fidelity ($7.95), both in tax-advantaged shelters.

[Jon_Snow]

Lots.

I am particularly interested in owning quality dividend paying companies with long histories of increasing these dividends. My decision to buy Canadian bank stockand Canadian telecom stocks in late 2009 is largely responsible for my current FIRE status. Been steadily buying companies like this ever since.

I've had a few missteps buying individual companies...but I consider it part of the learning experience.

TD WebBroker all the way. :)

[WildJager]

I have a handful.  All are already in the s&p 500, but I own extras shares for performance or dividend history.  I use USAA for all of my brokerage needs.  Not as cheap as vanguard, but it's nice to have it all in one place.

I use small amounts of money for play stocks that are smaller caps, and have done well overall.  However, that's gamlbing more than anything unless you know the businesses very intimately (I do not).

[tetlee]

I own a single Berkshire Hathaway (BRK.B) as it gets me ~10% off my car insurance (as per this thread)

[TheAnonOne]

This question might be better in Investor Alley, for what it's worth.

My family holds about 50% of our portfolio in individual positions. We intend to hold them for many years and continue growing them (in fact our IPS says we can't sell for 5 years after opening a position.) We hold them at Vanguard ($7 per trade) and Fidelity ($7.95), both in tax-advantaged shelters.

How do you buy individual shares through Vanguard? I have looked around the site, but couldn't find it... I might be blind :)

[TheAnonOne]

This question might be better in Investor Alley, for what it's worth.

My family holds about 50% of our portfolio in individual positions. We intend to hold them for many years and continue growing them (in fact our IPS says we can't sell for 5 years after opening a position.) We hold them at Vanguard ($7 per trade) and Fidelity ($7.95), both in tax-advantaged shelters.

How do you buy individual shares through Vanguard? I have looked around the site, but couldn't find it... I might be blind :)

If you have a brokerage acct, it should be there under the brokerage products header on the buy/sell page.
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Just to add to this. No, I don't buy individual stocks. I don't know if I could handle it emotionally. The closest I got was buying a sector etf in the summer and I regret that.

Hmm, I must not have one... I have a regular taxable account. I can buy VTSAX with it, but I don't see how to open a brokerage either...

[protostache]

This question might be better in Investor Alley, for what it's worth.

My family holds about 50% of our portfolio in individual positions. We intend to hold them for many years and continue growing them (in fact our IPS says we can't sell for 5 years after opening a position.) We hold them at Vanguard ($7 per trade) and Fidelity ($7.95), both in tax-advantaged shelters.

How do you buy individual shares through Vanguard? I have looked around the site, but couldn't find it... I might be blind :)

If you have a brokerage acct, it should be there under the brokerage products header on the buy/sell page.
---
Just to add to this. No, I don't buy individual stocks. I don't know if I could handle it emotionally. The closest I got was buying a sector etf in the summer and I regret that.

Hmm, I must not have one... I have a regular taxable account. I can buy VTSAX with it, but I don't see how to open a brokerage either...

When you're looking at the account listing there should be an "Upgrade" link at the top. That will guide you through the process. If you don't see it, just give Vanguard a call and they'll help you out.

One thing you might want to be aware of: Vanguard only does automatic dividend reinvestment for US domestic stocks. If you're looking to invest in things like Nestle or Shell Oil or Unilever (they'll have "ADR" in their name on the stock information sites) with automatic reinvesting then you'll need to use a different broker.

[use2betrix]

Purchasing single stocks through Vanguard is a little tricky. I had to call Vanguard for more information.

Unlike Vanguard funds, you can't transfer money directly out of your bank account to purchase an individual stock. You must transfer money into a vanguard money market account, then purchase the stock from that account. Seems kind of silly, I know.

Once you do it and figure it out it's pretty simple. Unless you hold money in that money market account, you have to wait a couple days for to transfer from your bank account to money market, then to buy. So it takes a few days.

As for the rest of the question. I obviously do have a few individual stocks. Mine are all major oil companies and purchased recently. I feel far more confident that oil is going to rise, as its at an all time low, as opposed to dumping 100% into my VTSAX right now.

[doggyfizzle]

I own 15 individual stocks.  No trading/account fees or commissions through Wells Fargo PMA account.

[dmn]

I buy and hold individual stocks for domestic stock market exposure, but I do not trade actively.

Since ETFs are just collections of individual stocks, I figured I might as well cut out the middleman. Whenever I have a decent chunk of money (about 3000$) that I want to allocate to domestic stocks, I buy a new stock from an industry which I am currently underweight. For example, last time I bought a wine company since I did not have any alcohol selling companies yet.

The drawbacks are:
(1) In the early accumulation phase, I am less diversified than with an ETF.
(2) It is slightly more work to go through stock lists and find out which one would be good to buy for improved diversification (you need to check which industries you are underweight and find companies from those industries.)

The benefits are:
(1) No management fee: even a TER of 0.2% adds up over time.
(2) Lower counterparty risk: ETFs engage in swap contracts or securities lending which induce some (small) counterparty risk. There is also the possibility of fraud by ETF employees. By holding the stocks directly, I avoid these risks.
(3) Less active trading than an ETF: since I buy and hold my stocks, I do not have such high turnover. ETFs sell whenever the index composition changes, incurring trading costs and - in some countries - creating taxable events.
(4) Additional small-cap exposure: I can also buy smaller companies which do not appear in the major domestic national index (and TERs on small-cap ETFs are about 1%!). Thus, I am also somewhat diversified on the size factor.
(5) Liquidity premiums: Some companies in Germany have two kinds of stock which are almost identical, just that one of them has voting rights and the other hasn't. When one of these is in the index and the other isn't, then the index version is much more liquid, and the other has much lower valuations. For example, when I bought BMW stock, I chose the non-index version which is 20% cheaper but grants the same right to dividends and company assets than the index version. It has a 1% spread, so it is not useful for trading, but for buy&hold the ability to choose the illiquid non-index stock boosts returns without additional risk.
(6) Better diversification amongst industries: domestic stock markets are often focused on certain industries, e.g. a large chunk of German stocks depend on the automobile and chemical industries. I can select my subset of stocks from index and non-index stocks such that my exposure to industries is more diversified than that of my domestic stock market as a whole.

For international exposure, I use ETFs to avoid the complications involved with withholding taxes on foreign stocks. It's just for domestic stocks that I do not see the great value of ETF investing.

[thedayisbrave]

I have a small brokerage account with Vanguard, and the rest are index mutual funds.  Index funds have a lot of benefits, but I'm the type of person who doesn't really wed myself to one investment philosophy. 

The individual stocks are mostly blue chip: GE, JNJ, KO, etc.  I like businesses that have been around for a long time.  I also own some Tesla, as it's been good to me. 

I use my poor performers to TLH and that's that... win-win on both sides :)

[david51]

12 stocks in account at Scottrade, 5 more in Roth at Fidelity.  It placates my gambling instinct, its like having a sports bet 5 days a week.

[Bertram]

The drawbacks are:
(1) In the early accumulation phase, I am less diversified than with an ETF.
(2) It is slightly more work to go through stock lists and find out which one would be good to buy for improved diversification (you need to check which industries you are underweight and find companies from those industries.)

It also sounds like you are never re-balancing each of the stocks, or really have any sort of fixed allocation you are striving for. If you did this even only a few times a year, the costs would be higher than with an ETF.

I am not saying you have to, but when you compare it with an index-ETF, that's part of the equation. Also with individual stocks you don't have any long-term models to rely on. Again, you can obviously still be successful, but I wouldn't count on the math and probabilities working the same way as with the major ETFs (then again you would have this problem anyway in Europe, since there are no large studies/models available anyway).

I think individual stocks are fine, if you enjoy being busy with the stock market. And if it's just a small part of the stash. The less you really understand of it (and there's enough to learn for years and decades of studying) and the more you invest, the more it likens to a game of luck.

[dmn]

It also sounds like you are never re-balancing each of the stocks, or really have any sort of fixed allocation you are striving for. If you did this even only a few times a year, the costs would be higher than with an ETF.

I can do limited rebalancing by reinvesting the dividends into whatever is underweight. I also do this with new funds during the accumulation stage. In the deaccumulation stage, I can rebalance by living off whichever portion of the portfolio is overweight.

Note that individual stocks are also never rebalanced in an cap-weighted ETF unless it completely drops out. Capitalization weighting means that when a stock goes uo in value, it just makes up a larger chunk of the ETF.

I do not want to sell stuff for rebalancing anyway since realized capital gains are taxed in Germany.

I am not saying you have to, but when you compare it with an index-ETF, that's part of the equation. Also with individual stocks you don't have any long-term models to rely on.

A successful similar long-term example would be the 80-year old Voya Corporate Leaders Trust Fund which bought 30 blue chips 80 years ago and basically kept them since then. It now has 22 stocks left and has by chance outperformed the S&P500 over its lifetime; I interpret this as the random deviation you get from holding just 22 stocks, so I do not think of it as a plus but as a measure of the increased risk (it might just as well have underperformed by as much).

My own plan is less extreme: it involves holding more than 30 stocks, and I would rebalance into new industries over the decades using reinvested dividends.

You would have this problem anyway in Europe, since there are no large studies/models available.

There are long-term studies for the whole world, see the very insightful Credit Suisse Yearbooks on global investment returns. I agree with them that relying on US data is a bad idea (for both US and non-US investors) because: "Extrapolating from such a successful market can lead to success bias. Investors can gain a misleading view of equity returns [...]. That is why this Yearbook focuses on global returns, rather than just those from the USA."

Again, you can obviously still be successful, but I wouldn't count on the math and probabilities working the same way as with the major ETFs. [...] I think individual stocks are fine, if you enjoy being busy with the stock market. And if it's just a small part of the stash. The less you really understand of it (and there's enough to learn for years and decades of studying) and the more you invest, the more it likens to a game of luck.

I do not understand that point really. What do you think is substantially different between ETF investing and buying and holding many stocks? Do you think it makes a big return-boosting difference that an ETF sells companies once they lost most of their value (i.e. drop out of the index)? Or do you believe that buying the recent winners that moved up into the index contribute to a major part of the returns? I agree that there is a momentum premium, but it is not so large that these small readjustments in the index can capture a large part of it (the adjustments are always very small due to capitalization weighting), and it should be swamped by the TER which is applied to the entire ETF.

[Bertram]

Those are great points you make and great links! Thanks. I'll have to read/think about that in more depth.

I guess in the end it comes down to: Is the time and effort invested worth the TER saved. I tend to "default" to ETFs because it's easier and well researched. You default to your personal strategy because you see lower cost. I think in a lot of possible/likely markets both strategies would probably perform similar enough that it'd be difficult to prove the superiority one way or another. My gut feeling thinks that the ETF approach might be better in the less likely scenarios with major/unexpected changes - but I cannot back that up in any way.

[dontwannaworkforever]

I was once huge into individual stocks and convinced myself that I could beat the market which I did for 3 years straight actually but it wasn't worth all of the constant research, checking up on them, etc...and I barely beat the indexes anyhow. I attribute to part skill (I'm a finance major) and also part-luck. In fact, I sold some of my winners too early.

So now I just do indexes. I even diversified those pretty well. Only individual stock I own is a REIT. Realty Income Corporation.

[dmn]

My gut feeling thinks that the ETF approach might be better in the less likely scenarios with major/unexpected changes - but I cannot back that up in any way.

I think it's the other way round - in unexpected, unlikely scenarios the ETF would do worse, since in those situations the ETF's counterparty risk can become relevant.

[Bertram]

My gut feeling thinks that the ETF approach might be better in the less likely scenarios with major/unexpected changes - but I cannot back that up in any way.

I think it's the other way round - in unexpected, unlikely scenarios the ETF would do worse, since in those situations the ETF's counterparty risk can become relevant.

One can enumerate scenarios where either would do better than the other. The problematic part is assigning/agreeing on probabilities and quantifying the possible damage - too many assumptions go in, and even you could agree - would it sway the decision in one direction or not? Probably not.

Main customer of ETFs are big institutional investors, so I am guessing if it's good enough for them it's good enough for me. And with the capital they have it would be much easier to replicate the index themselves, if they wanted.

[dmn]

Main customer of ETFs are big institutional investors, so I am guessing if it's good enough for them it's good enough for me. And with the capital they have it would be much easier to replicate the index themselves, if they wanted.

Institutional investors have to worry a lot more about transaction costs, since they are usually investing for the short term (even pension funds are under pressure to "react" to different market environments and changing regulations, busily shuffling around assets). Also, ETFs are more attractive for institutional investors since they get lower fees than private investors.

[Spork]

We have some.  It's about 9-10% of our total and we have no plans to make it more.   What we have now differs in returns from our Vanguard funds by 1/100th of a percent.  That doesn't make us investment wizards-- I think those returns are "mostly luck."

[Calvawt]

I use Scottrade as my main broker, but also have a TradeKing account.  Scottrade has a better interface and a better mobile app than TradeKing.

I have multiple individual holdings, my largest being Apple stock. 

[Landlord2015]

With risk being called troll and disturbance I will say this. I don't have the patience for stocks waiting in years.

Yes I do have long term investment already as real estate.
That said I was thinking that making a sports bet for better or worse is fast way to either loose you investment of win big time. I have never made a bet of thousands and my highest bet is in the hundreds.

That said you can argue until you are blue it is only luck betting but no if you are sports expert. That said the risk is great so I am not saying it is worth taking it and everybody is responsible for themselves.

Sportsbetting is faster then stocks... for better or worse.

Please understand with this post my intention is not to downplay or insult stock investors. For the record I love sports both doing and watching.

Therefore this post is made as both respect for stockinvestors and sportbetters.

[doggyfizzle]

A successful similar long-term example would be the 80-year old Voya Corporate Leaders Trust Fund which bought 30 blue chips 80 years ago and basically kept them since then. It now has 22 stocks left and has by chance outperformed the S&P500 over its lifetime; I interpret this as the random deviation you get from holding just 22 stocks, so I do not think of it as a plus but as a measure of the increased risk (it might just as well have underperformed by as much).

Not "by chance" at all; the same set of durable competitive advantages that were identified by the original fund managers still exist to this day for almost every remaining stock in the portfolio...that's why the fund has such an impressive track record.  Please keep quiet about this fund (actually UIT), it has served as a bedrock position in my portfolio for a long time and the less attention it gets the better.