Why when it comes to equities, I'm sticking to funds...

[REWahoo]

I've never been comfortable buying individual stocks. On the few occasions I've stuck my toe in the water I've made some money and lost some money, and thankfully had only had one really big loser. But I've rarely been able to sleep well while owning them and usually felt a sense of relief once I sold.

Here's an example: I bought MFW in Dec of 05 at $16, watched it drop to $13, then sold it in May of 06 when it hit $16 again. Today it's trading at $56.

I'm definitely a fund guy.

 

[Mwsinron]

Im not intelligent enough to trade individual stocks myself.

 

[Donzo]

I'm with you on the individual stock thing. Other than a few pharma co. stocks I hold(Know the industry well) all other investments are in various funds. Funds just feel safer and are more diversified. On the other hand my Dad never owned a fund....ONLY stocks - mostly blue chip - my Mom has continued this strategy.

 

[brewer12345]

I sometimes think it doesn't take brains, just a sufficiently strong stomach.

 

[TromboneAl]

I'm not dumb enough to trade individual stocks myself.

I say that mostly for literary symmetry, but I do believe that buying funds is the smarter way to go.

 

[FinanceDude]

I sometimes think it doesn't take brains, just a sufficiently strong stomach.

Amen to that................

In my personal portfolio, I only own 4 stocks. I switched to funds in the middle of 1999, and have enjoyed the sleep ever since.............

 

[Siv]

I'd agree to that although sometimes I think the funds I hold goes up way...too slow compare to some individual stocks but I'm happy enough to let go.

 

[wabmester]

I still buy individual stocks, but I've become very conservative in my old age. These days, I mostly buy widows-and-orphans stocks.

For example, I bought a slug of AT&T a couple years ago. Nice 4% dividend yield, and it didn't hurt that the price of the stock doubled since then.

When Bernanke became fed chairman, he disclosed that his only holding was MO. So, I loaded up at $60 or so. 5% dividend yield, and then it went up about 50% (including the KFT spin-off).

This sort of luck can get a guy hooked on these "conservative" stocks. But I'm sure I'll get burned eventually.

I've also bought a couple of Brewer's picks, but those stocks are super-sensitive to economic conditions, so I fully expect them to get cut in half before I realize I was supposed to sell....

 

[FinanceDude]

I'd agree to that although sometimes I think the funds I hold goes up way...too slow compare to some individual stocks but I'm happy enough to let go.

Rollercoaster at Six Flags or long grade in the mountains, it's your choice...........

 

[wildcat]

Agree with you REWahoo. Much more difficult to hold individual stocks vs. funds. If a stock goes down it is your fault, if a fund goes down it is the market's fault. Nice run on the MFW though

 

[ats5g]

Perhaps a problem contributing to the not owning of any individual stocks is that people are looking at/focusing on the returns of the parts of their portfolio, and not the returns of the entire portfolio as a whole.

For example, is there a difference between owning all the stocks by market cap in the S&P 500 versus owning an S&P 500 index fund? IMO, not really. Yet, investors may have more behavioral problems seeing the returns of each individual stock on their statements than seeing the exact same performance of an S&P 500 fund on their statements.

Taking this one level higher, people may have a problem seeing the individual performance of each mutual fund they own. This may be another reason balanced funds/TR funds are so good for a lot of people.

- Alec

 

[wabmester]

For example, is there a difference between owning all the stocks by market cap in the S&P 500 versus owning an S&P 500 index fund?

I used to think this was a good way to avoid fund fees, but reinvesting dividends, rebalancing, tracking cost basis, and dealing with spin-offs is a royal pain.

 

[unclemick]

Still holding my wild and frivolous - STON and EGLE - thanks Brew.

Still trying to kill the last of my DRIP plans and get down to my last 30 individual stocks in my Vanguard brokerage account.

They were bought over a 15 year period based on their dividends(all praise to the Norwegian widow) with an expected holding period of forever. I don't monitor their performance or rebalance - sell if the dividend gets cut - ie I always buy high, sell low - counterintuitive but then - I'm lefthanded.

Don't expect anything except dividends. It's a putz/hormone thing.

heh heh heh - 15% of portfolio - the frosting, not the cake portion of my retirement 8).

By the by - Exxon has passed Eli Lilly in my port. both held since 1993 so there is an ebb and flow recency thing at work. Still good to go on dividends tho.

 

[yakers]

This sort of luck can get a guy hooked on these "conservative" stocks. But I'm sure I'll get burned eventually.

I've also bought a couple of Brewer's picks, but those stocks are super-sensitive to economic conditions, so I fully expect them to get cut in half before I realize I was supposed to sell....

Sounds like where I am. I no onger 'trade' stocks, just DRIP a few stocks so its DCAing into them over years with no intention of selling. While I had my trading account I found it easy enough to find some good stocks to buy that returned better than the S&P500 and still were not too speculative, but I never learned when to sell. For a speculative stock knowing when to sell would be even more crticial.
Now its all Target Retirement, asset allocation, DRIP stocks and simple stuff. You folks who trade stocks are either smarter or stronger of stomach than I.

 

[trixs]

Interesting points of view!

Now you guys will probably think I am crazy but here is what I do. When I first started investing I played around and eventually came to a completely mechanical strategy. Every year + 1 day ( long term!) I sell/buy/rebalance into the 10 stocks the meet the criteria.

Interestingly my new year just came the other day and my new portfolio is very tilted towards financials.

Bank of America Corporation
Citigroup Inc.
Freddie Mac
ALTRIA GROUP
Pfizer Inc.
SunTrust Banks, Inc.
AT&T Inc.
U.S. Bancorp
Wells Fargo & Company
Washington Mutual, Inc.

Oh, can’t forget the damn Kraft now (thanks MO!!) :

Perhaps someone can see some similarities between these stocks aside from most being financials.

 

[wabmester]

Perhaps someone can see some similarities between these stocks aside from most being financials.

I have been drooling over the fundamentals on some of those financial stocks, and Brewer is a huge bull in that sector, but I can't help but think back to the S&L fiasco of the 80's and see a bunch of similarities to the current environment. I keep slapping myself everytime I get close to pulling the trigger on WM, for example. But I have to admit that I took a bite of BAC recently....

 

[brewer12345]

Perhaps someone can see some similarities between these stocks aside from most being financials.

Simple. Most of them are banks with a heavy retail and mortgage presence, which is exactly what the market has thrown out the window recently. These sorts of banks arre cheaper now than they have been in years.

 

[LOL!]

...
Interestingly my new year just came the other day and my new portfolio is very tilted towards financials.

...
ALTRIA GROUP
...
Oh, can’t forget the damn Kraft now (thanks MO!!) :

We are giving our KFT away to charity.

 

[jIMOh]

I have a sharebuilder account I used to use, and I "broke" even being stupid, so I think I can make out well once I get enough liquid cash to invest.

Stocks are cheaper to own than mutual funds. A person needs 15 stocks to be "diversified", and anything more than 20-30 is overkill (based on what I've read).

Stocks are cheaper:

consider sharebuilder ($12 to buy unlimited shares)
fund account with 20k and buy $1000 of 20 different stocks

Costs $12 12/20,000= .06% expense ratio.

The lowest expense ratio I have seen on a mutual fund is .1% on spartan 500. More work to manage the stocks... but if saving money/costs is the goal, stocks are cheaper.

 

[wabmester]

Stocks are cheaper to own than mutual funds. A person needs 15 stocks to be "diversified", and anything more than 20-30 is overkill (based on what I've read).

You might want to read this:

The 15-Stock Diversification Myth

 

[trixs]

...I can't help but think back to the S&L fiasco of the 80's and see a bunch of similarities to the current environment. ...

I was very young in the 80s which results in me have no idea what happend *Looks up*

 

[jIMOh]

You might want to read this:

The 15-Stock Diversification Myth

The article ends with "the best way to eliminate risk to to own the whole market". I don't buy that, I only want to own the portion which does well.

 

[wabmester]

I was very young in the 80s which results in me have no idea what happend *Looks up*

FDIC chronology: link

Wiki: link

Basically, banks got greedy and underestimated the risks they were taking. The recent lending environment is a classic example of moral hazard in action....

 

[brewer12345]

The difference between recent stupidity and the S&L debacle was that back then regulation was a lot looser and there was very significant fraud on the part of a number of regulated S&Ls. In contrast, the most recent blowup has its epicenter centered on the unregulated lenders, which didn't have to follow the increasingly heavy regulation the bank regulators laid on the banks.

 

[LOL!]

The lowest expense ratio I have seen on a mutual fund is .1% on spartan 500. More work to manage the stocks... but if saving money/costs is the goal, stocks are cheaper.

We used to own lots of stocks. My spouse was in 2 different investment clubs. We could research stocks out the whazoo. We moved from mutual funds to stocks because of the tax efficiency of stocks. We were losing about 2% a year on taxes in our taxable accounts (funds made 10% distributions taxed at about 20%). Our portfolio took on an S&P500-like mix with some ADRs. We even goosed returns by selling covered calls.

In the end, we found that some years we did better than our benchmarks, some years worse. But it was alot of work. Then ETFs came along and we finally figured out how to put certain assets in tax-deferred accounts like 401(k)s and others in taxable accounts. It was big deal to me to sell the lowest expense ratio and only available index fund in my 401(k) -- a 0.65% er S&P500 index fund --- in order to make room for a bond fund. I can hold SPY or VIIIX (er 0.03%) in my taxable accounts.

Now if I could just get those pesky etf dividends to be tax-deferred. Are there tax-managed index funds that don't pay any dividends?