@index: indexing is not the answer unless you depend on your stocks for significant amount of your income. let's think about this: any real difference between owning 20 stocks vs 100+ stocks? at that point, you are losing much more in potential profit than gaining in risk management because you are essentially throwing darts at random stocks. (Pricing an ETF is also much difficult than pricing an stock.) Just curious, what is your 1 year target for AAPL?
I'm confused. I never said anything about indexing. I actually gave you some reading material if you want to select your own investments...
I agree that pricing an ETF is much more difficult than an individual stock, but you haven't said a single thing that leads me to believe
you know how to price an individual stock. Hence my book recommendations.
As far as Apple stock is concerned; I don't have an opinion or price target. They are a 635B company. For Apple stock to double, it would be larger by market cap than the entire Energy Sector of the S&P 500 - Exxon, Chevron, Schlumberger, Kinder Morgan, ConocoPhillips, Anadarko, etc... etc... etc...
COMBINED.
I am interested in investing in companies that:
1- Have a long growth runway - I look at their revenue vs their addressable market.
2- Have great management - Does management treat shareholders as partners? Is their thinking long term or are they interested in propping up stock price in the short term by hiding expenses or buying back stock when the price is high?
3- Have a high return on invested capital - Its hard compound value quickly if you are spending 95c to make $1.
4- Have a defensible moat - Why do customers stay with the business? How sensitive is the business to the overall economy? Could you replicate the business if you had their market cap in cash?
5- The company is tax efficient - It is easier to grow your business if you are not giving half your profits away in taxes. Some companies and industries - insurance float, cable, RR, distribution, etc.. are more tax efficient than others.
You should develop your own checklist, but to do that you need a basic understanding of finance and investing. Once you have spent a significant amount of time learning how to invest, you may discover you do not have the temperament to invest in individual companies anyway.
Look at it this way:
You need to spend 1000 hours learning before you do anything. After 1000 hours there is a 50/50 chance you are not going to be good at it anyway (you need to be honest with yourself). If you are willing to invest that kind of time go for it. If not index.