Stocks or Funds

[unclemick]

Generally I recommend index funds(more so Target Retirement Series) or balanced Value ala pssst Wellesley types(Wellington, Dodge and Cox also) for most of my friends.

However - there is this thing called hormones - which cannot be ignored.

One can go to the library and read the 'Postscript' chapter of Ben Graham's Intelligent Investor or take note of the founder of 'The Retire Early Homepage' - the original sponser of this forum who got here(ER) with individual stocks.

Happens every generation and I have no clue as to your 'true?' odds of success.

A little sin is sometimes fun! And remember - fall is football!

heh heh heh -

[rogersteciak]

When you buy a fractional share of a great business stock, it's important to know why you are buying it: income, appreciation, or a combination of the two (i.e., total return).

If you buy a stock for its income (and increases in income in the future due to its level of business growing), you should not be concerned about what its quoted price is every day (assuming its business fundamentals remain solid).

If you buy $10K worth of shares yielding 4%, for example, you will receive $400 a year of dividends as long as the company is doing well (meaning its Board of Directors continues to approve the payment of a dividend).

If the valuation of the shares drop 50% to $5K or increase 50% to $15K, you will still get your $400 a year of dividends regardless of the quoted price on the public exchange.

But if you are buying the shares for appreciation, then you are in a completely different ball game. There, the quoted price means everything (as long as the fundamentals of the business remain solid), expecially when you are at the point where you want to sell your shares for a gain.

But the decision of why you buy or sell a stock is your own decision to make. Other people can buy or sell the same stock for completely different reasons than yourself and still make money doing it.

Short-term flippers (i.e., day traders), for example, can make money in the next hour or two from momentary appreciation and long-term buy-and-holders can make money from long-term capital appreciation.

Long-term income investors, on the other hand, can make money over the years from the growing stream of dividends received (with their heirs having to worry about the quoted price should they want to sell the shares they inherit).

[haha]

It's a fact of investing that as a dividend rises, so do share prices, unless treasury rates are climbing or the company is perceived to have lost investment value, such as market strength, margins, ROA, etc.

So if you do a good job of finding stocks with growing dividends and strong businesses that can stay strong, you will get your income and your net worth too, over the cycle.

Even better if you buy them at a low point in their cycle, or the stock market in general.

Ha

[Marquette]

Buffet says that a know-nothing investor should stick to index funds. I feel that I'm a know-nothing investor and I'm sticking to index funds.

My wife's grandma has managed their investments very well by concentrating on 12 stocks and owning them long-term. I know she's a know-something investor and doesn't let hype or exuberance get to her.

I don't think it takes that much work to become a know-something investor. Heck, you could probably do ok just by tracking what you and your neighbors consume and invest accordingly in the companies that provide those products. That plus some financial statements and a few cups of coffee would get you further than most. The discipline part would be in forcing yourself to react opposite to the market. (Yes, I realize that, as a market investor, I'm at odds with this part of my statement).

For example, it probably wouldn't take a seer to figure out 5 years ago that oil would be a strong play. However, you'd now be sitting on a huge pile just when everyone else is rushing to get into the game. You'll have to fight your own greed switch to start selling off, if you think that oil is ready to pop... and realizing that might mean leaving even bigger returns on the table. When you've just made the right call, it can be hard to remember to stay fearful when others get greedy.

Otherwise, I think comparing oneself to the giants on the street is a bit of a disservice. Sure, they're smart. Sure, they trained for this. But, really, it's not like surgery or theoretical physics. And, you have an inherent advantage over them. If they're successful, they get a lot of money into their funds. So, they might have been successful picking their 10 favorite stocks. However, now they need to go down the list... it's a lot harder picking your 30th favorite stock. You, you can concentrate on the companies you like the most. You don't need to worry about style drift or mot being able to continue to pour money into your 10 favorite stocks.

Me, I'll keep investing in indexes because, otherwise, I wouldn't have time to post here.

[rgarling]

Originally Posted by Marquette

Buffet says that a know-nothing investor should stick to index funds.
...

Me, I'll keep investing in indexes because, otherwise, I wouldn't have time to post here.

A wise choice.

The "know something" investors are taking on risk for which they will not be compensated for (on average). Some will win, and win big. Some will lose, and lose big. In the end, it will boil down not to what they knew, but to how lucky they were.

[Hal3]

Originally Posted by popowich

I'm so annoyed

There's your answer. Life is too short to be annoyed.

I suggets low cost ETF's like Vanguard.

How much should be in bonds?

That has been discussed above. The point of bonds at your age is not to have money IN bonds but to have money OUT of stocks. When money is OUT of stocks your neck doesn't snap so much on the rollercoaster. Only you know how strong a neck you have.

Here's a little-known secret:

There is a very simple way to DOUBLE the value of your retirement portfolio. Just SAVE twice as much!

Congrats on being a saver!

[popowich]

Originally Posted by CuppaJoe

Hello, Raymond, from Clueless Cuppa. 31 and you've already had time to watch stocks tank! How long do you want to hold them, say, if they don't tank? How long did you hold the tankers?

Some go up, some go down, I sold most for a profit, rather overall I've sold for a profit. Checking my account frequently to see what's up and what's down and cursing the ones that go down 20% 50% or worse on bad news I'm done with. I've been investing in stocks for about 8 years now. I'd rather just be in funds and SPY's for the most part, with a handful of individual companies that I like and have a decent understanding of what they are selling. I'm better at profit taking than I was a few years ago. Watching stocks be up 50% and "letting them ride" only to watch them quickly crumble into 33% losers annoys me. I suppose it's far from too late for me, but I wish I could go back 10 years and tech myself a few lessons.

-Raymond