Index VS individual stocks

[LOL!]

One downside to managing one's own personal index sample portfolio in a non-retirement account is what to do when a position gets over-sized. If you owned VTI or VOO there would be no action.

I own VTI and there would be action if VTI became over-sized in my portfolio. I would have to sell some shares to get back to within the range of percentages of large-cap US stocks that I had set in my asset allocation plan.

Because of previous tax-loss harvesting this year and carryover losses from past years, there is no emotional baggage nor taxes to worry about. This makes portfolio management essentially emotionless and practically automatic.

 

[triangle]

I own VTI and there would be action if VTI became over-sized in my portfolio. I would have to sell some shares to get back to within the range of percentages of large-cap US stocks that I had set in my asset allocation plan.

Because of previous tax-loss harvesting this year and carryover losses from past years, there is no emotional baggage nor taxes to worry about. This makes portfolio management essentially emotionless and practically automatic.

Sure, if one owns a number of index funds and they became out of balance relative to each other it would be wise to rebalance.

My point was that when owning a large individual stock portfolio that might loosely approximate some index, that the relative gains and losses between individual securities occur more frequently and to a wider extent. For example I have some technology positions that are up 2-3 times over the past five years, while some oil/energy related names are down as much. So even though one has more control over when to sell and thus more control about when to take capital gains/losses when owning an individual stock portfolio, much of that advantage is lost if one also wants to be disciplined about rebalancing between sectors. Since applying that discipline will result in more frequent selling/buying which would not otherwise be a goal of a buy-&-hold type investor.

 

[DrRoy]

An advantage of individual stocks is complete control over taxes. No worry about end of year distributions. I have seen some discount brokers charging $1 for a trade, at this price you could assemble 100 stocks and "buy the market". You can decide to take capital losses on your losers and/or lock in some LT gains on the winners. No recurring annual expenses is a nice plus.

Index ETF's or funds are pretty good here. They usually only sell for changes in the index or big withdrawls, which are rare. Indexers are more buy and hold.

 

[LOL!]

I suppose index fund and index ETF investors are more buy and hold, but I can state my portfolio turnover so far in 2016 is about 150%. That's with many moderate positions unchanged, but a number of largish transactions in tax-advantaged accounts and some tax-loss harvesting and clean-up in taxable accounts.