Individual Stocks or Index Mutual Funds

[Beststash]

As I begin to move more and more into stocks from a heavy percentage of bonds (short term), I often question my individual judgement. Although I feel I know about as much as any of the CFP's I have met in the last few years, I have noticed that when things are well, I do well, and conversely when things are bad, I do bad.I guess that would be considered "normal".
I would like to make my investments and just forget about (mostly - although I have so much time, and because the internet makes things so accessible - I just can't ignore) and revisit about once a year for asset allocation purposes.
Is this possible?? I am not greedy - I would gladly settle for a 8-10% return and FIRECALC says I will have no problems - however, with my company pension - the health care portion is funded yearly and I expect a significant rise in the near term.

Any suggestions or advice. I hope I did not go off topic.

My goal is 60/35/5 Stocks/Bonds/Cash - any help appreciated.

Beststash

BestStash,

8-10% would be grand for me. I am only planning on 6% with 3% inflation. - A 3% real return.

Your title was Individual Stocks or Index Mutual Funds. I'd answer Index Mutual Funds, since 80% or so professional Money Managers cannot beat Index Mutual Funds, what do you think your odds are?

Get a good book on Index Mutual Funds, spend a couple weeks reading it, then revisit this forum and see what your questions are then.

Good Luck -

[wabmester]

Conventional wisdom is that very few can beat the market, so don't even try.

Slightly less conventional wisdom is that fund managers fail to beat the market because it's not their money, and they are given so much money that they are forced to make bets they don't believe in.

Individual investors generally don't suffer from too much money, so it should be possible to make a few bets that you really believe are justified, and to make those bets in a way that minimizes correlation, and beat the market.

But if you really want to just make a bet and forget about it, then pick an index fund and hope that the historical trend of increasing equity prices continues as it has for most of the last century (even though nobody really understands why).

[unclemick]

I've owned individual stocks since 1966 but my ER is totally dependant on balanced index index funds.

If you go to Berstein's website you can get the gist of the agrument and disagree with his conclusion if you wish. Efficient Frontier website - type in myth on the Goggle search.

I've bought and sold stocks since 1966 and have no intention of quiting - BUT they're a hobby and over the years responsible for periodic bursts of spending - two sports cars, some penthouse living, a duplex, fish camp and a few vacations -Bahmas, Mexico, Europe - Lagniappe is the local term.

Hi unclemick! Re. your statement "my ER is totally dependent on balanced indexed funds", man, that would scare the hell out of me. I am very heavy into bonds now, but if I
lost it all (100%) I would still not have to go
back to work. I know you think the index funds give you
automatic diversification. That's okay, but would not be
nearly enough to allow me to sleep soundly.

John Galt

[unclemick]

John

Here's the deal - like you I try to imagine worst case - ie I had calculated a -22% portfolio drop should we get a 1973-74 type event so the -16% low point during the recent 2000-03 unpleasantness was sleepable - but a 'little' chewy.

[renferme]

Here's my percentages at the moment: 21% in individual stocks and 6% in stock mutual funds (Vanguard). Of that 21%, the stocks are all (except 2) dividend payers such as REITs, blue chips, 1 preferred stock, and a couple of closed end preferred stock funds (I'm considering those as stocks rather than mutual funds since they trade on the NYSE). I have another 12% in CDs. Everything else is in Vanguard 401k in something called Fixed Fund (paying about 4% this year). I continue to pile up money in my Ameritrade account buying stocks and a closed end municipal bond fund. Probably want no more than 30 to 33% invested in stocks. The dividend income and CD income is reasonably substantial and will be a nice addition to my pension when I retire next year. I can also begin to withdraw from my 401k.