*NO* Individual Stocks

[Whisper66]

I'll give a slightly different response than most here. We generally buy broad index funds but over the years have purchased some stocks that were dividend aristocrats. Our plan includes a variable asset allocation which is allowed to vary from 60/40 to 90/10. These individual stocks displace funds from our fixed assets however we keep at least 3 yrs of expenses in bond funds or cash to avoid selling stocks during moderate market downturns. Generally we bought these stocks when their prices were relatively low and we knew we wouldn't need to sell for many years if we didn't want to. Purchased the stocks for their relatively high dividends compared to bond funds. Over time we have been selling the stocks off if/when their prices reached high levels. Currently we are 6 years into retirement and are left with 3 stocks and 5 broad index funds. All remaining stocks are still dividend aristocrats that we plan to sell off eventually. Our spend rate has averaged 5.4% including taxes on Roth conversions .... 3.7% if those taxes are excluded. Annual rate of return since retirement has been an acceptable (to us) 5.7%. Note: portfolio YTD return this year is up to 15.8%. This is mostly due to the individual energy sector stocks coming back from their 3/20 lows. Will probably end up selling some of these this year if they go much higher.

 

[DrRoy]

Me too. NO individual stocks. At age 46, I would want to be at a 3% WR.

 

[Lewis Clark]

We are 100% in ETFs and mutual funds. Never bought an individual stock for myself.

The only time I have bought an individual stock was buying a handful of shares for a nephew as a birthday present. He was getting interested in finance and I found a cheap stock in a company selling a product he could understand.

The company was acquired a couple of years later and the stock price went up by a factor of 2 or 3. My brother immediately begged me for more stock tips! Not sure he ever believed that this was the only stock purchase of my life.

 

[ncbill]

Sold all of my individual stocks by end of 2019...some (like XOM) I should have sold at least a decade earlier...

 

[retire48in2018]

I'm 100% mutual funds as well.

5% WR is shown to be ok with a certain AA (small caps, etc).

I think withdrawal rate is only one part of the equation. Can you mitigate expenses in a downturn and spend less? Can you stick to an AA and allow the rebalancing to manage some of the risk, etc?

Inherently, the first few years can be the biggest risk, if you start retirement with a downturn - do you have cash option at the beginning?

 

[phil1ben]

I'm the opposite, no mutual funds, all individual stocks.

+1

 

[Winemaker]

I have mutual funds, ETFs, and individual stocks. Fortunately, more ups than downs, and a few hold steadies. I do have a "speculation" or "gambling" account, which was a 401k plan from the employer who bought megacorp. It had $24k in it in 2014, and has $32k in it now, the last $8k came in the last 6 months.

 

[erkevin]

All individual stocks. However, our portfolio is not our main source of income (pensions cover that). Our stock portfolio is mainly designed for dividends, any growth is a bonus. We don't have any need for the additional income right now (and are 2 years away from 59.5 years) so we are "DRIP"ing all dividends. Most of the stocks are from the Dividend Aristocrat list.

 

[ERObjd]

I dont bother with buying individual stock. I let a decent index fund take care of it. Vanguard VBIAX Balanced index fund which is 60% stock 40% bond.ER of 0.07 . I do not have earned income so it is taxable for us. But put $ in the fund and one day when we decide to draw from it it will have done well or it will not, that will be the reality. Some people like to buy stocks though and some prefer index funds. I say what ever lets you sleep at night is right for you. I figure John Bogle knows a lot more about investing than I ever will and he advocates buy and hold a low cost index fund with whatever allocation and risk profile you prefer, based on your ability to take risk and willingness to take risk. Best book i have read about it is his "Little book of Common Sense investing"

 

[Exchme]

Over the years, I held some stock in the companies I worked for as part of their ESPP plans. I kept selling at just the wrong time, convincing me that I did not want to play that game any more, so now am happy to hold index funds. Even there I should simplify some more and quit tilting away from the total market as the tilts are not helping me.

 

[lonnie]

Retired at 54 with no individual stocks. Still don’t have any years later. Gave up on that after some trials earlier

 

[gwix98]

Two stocks and the rest ETF’s. Works very well. No withdrawals yet.

 

[melijov]

I did stock picking for 20 years with mixed results. I am 100% in 3 passive wide index ETF's, I am ready to retire any moment now and I am not messing with my retirement money

 

[HI Bill]

I have all ETFs except for a single stock, which was issued to me as part of an ESOP from a former company. Unfortunately, the single stock equates to 23% of my portfolio value today, and I can't diversify or sell for another 7 years. I've been perfectly happy with the return that VTI, VOO and VUG have provided, and these make up the majority of my not-so-diversified holdings.

 

[mckittri2000]

My holdings outside of cash and some bonds are all in mutual funds. I just find it easier to diversify that way. You may not make as much as with stock ownership but it does help you not to hurt as much when the market goes down. In the end, it's what a person feels comfortable with.

 

[Tracer]

I sold the last of my individual stocks about 12 years ago. At 72, I leave the stock picking up to the pros who do this for a living every day and have research departments that watch markets on a daily basis. I've been averaging 7-8% per year with managed funds, index funds and my managed account. I'm perfectly happy with that. I know some like to play the market. That's fine if you have the time and desire. In the past I did that with a certain percentage of my portfolio. But these days I'd rather not do all the research that's required to decide what to buy or sell and when to buy or sell it. I'd rather just enjoy my retirement and watch my investments grow over time without having to think about it.

 

[sroby2020]

Nothing wrong with your goals.
I, on the other hand, prefer stocks (Dividend Kings, Aristocrats) to provide me with a predictable income (trying to stay in a certain tax bracket), whereas Funds and ETF's can be a bit unpredictable on the capital gains side of things. I have about 55% stocks and the rest ETF's and CD's

 

[jetaylor]

Individual Stocks + Cash

I have all individual dividend-paying stocks, along with a cash balance to last 5 years (just in case). I enjoy researching companies, but depend greatly on several services that do much more research than I have time or ability. (68, almost retired)

 

[Perryinva]

I’m currently about 44% individual stock, but like others here, it is company stock that I am intimately familiar with. Many times it is zero. It was a major contributing factor to my retiring early for me (2 years ago @61) as it had easily outperformed all the other options in my 401k, over the 26+ years I worked there. It was easy to track as all my company match was in company stock for most of my working years. That 3.5% match ended up being over 20% of my 401k.

I am a market timer with this stock and typically do buy & sell it regularly as it has always been fairly cyclical along with a good dividend. 6 months ago I held none of it, having sold off all over a few weeks while it resided at a historical high for a few months. I didn’t hit the peak, but between divs and price appreciation, it was an easy 15% increase. I bought back in when it was hitting lows again.

I certainly buck conventional warnings of not having too many eggs in one basket, as my pension, which is about 1/3 of my income is with the same company, and do not recommend this to anyone. It may end up biting me in the butt sometime. But it has worked quite well for me, for many years, and the reality is virtually all of my portfolio is basically top off the income for discretionary money, so if I have to wait a year or two for some unforeseen event that requires me holding it longer, it doesn’t matter.

I would also echo that if sole income is regularly selling MFs, that 5%+ is risky for a possible 50 year retirement. If you have a high degree of confidence you are unlikely to live to 80, (you are an overweight, single, diabetic chain smoker, for instance, with a family history of heart disease) you are probably fine. Sort of, LOL.

 

[meleana]

We are in our 60's. Have mutual funds and a few ETF's. I Bonds and old EE bonds which I turn into I Bonds once they mature.


A lot in cash and hubby has a small amount in his former employer's stock (a national insurance company). Some physical gold and silver coins.


I also have no idea how to figure out what the return is on our overall portfolio. We take out enough to meet expenses. We have a budget but honestly in terms of discretionary spending I am not sure if we are staying in budget or not. We are fairly frugal but I have not racked it. I suppose I should....

 

[Running_Man]

The thread took quite a turn but the original question was anyone else using just ETF's and mutual funds to achieve a 5% withdrawal rate. Recent market action is making that very doable as favorable early returns are best case for such a plan. At 46 that is an aggressive plan.probably 50/50 on potential for it holding on, but upside for you might be better life with adjusting if the plan fails obvisouly in first 15 years. Would still have tim to recover portfolio at that point.

 

[Koolau]

I guess I'm the exception that proves the rule - or maybe disproves the rule - whatever the rule is. Well, anyway, I don't like individual stocks BUT I have a relatively high stake in ONE stock - my old company stock. I hold it in my remaining 401(k) AND in a taxable brokerage account - moved from a stock option purchase all those years ago. I keep taking money from the Megacorp stock to cover my RMDs (to a large extent) but the stock just seems to "grow back" most years. Then, because I'm a bit iffy on the basis, I "give" my brokerage account Megacorp stock to my favorite charities. But the remaining shares "grow back" most years. What's a fella to do?

A brief history (all about those rules and NOT rules, what to do, what not to do, lucky vs good, etc. etc.). I was the worlds best saver, but never invested well. SO, instead, I got lucky. When Megacorp was dawdling in the doldrums for all those years, they were also matching my 401(k) savings with hundreds (heck, thousands) of shares of Megacorp stock. There were some ups and downs and then the stock seemed to go crazy along about the time I was ready to be FI. I was FINALLY able to covert SOME of Megacorp's stock into other 401(k) options. Thank goodness Megacorp changed the rules about THAT. I finally was able to diversify from maybe 75% of THE ONE stock in my port.

By then, Megacorp stock had made me "rich" (okay, FI). As I left Megacorp, I still had a ton of stock left and have been whittling away at it - but it just grows back! Otherwise, I'd have very little of individual stocks. Having said all this, the phrase "dance with the one you brung" or maybe "stick with the mule you rode in on" (whoops! I think that's another story.) Point is, Megacorp j*b got me the money to save. Megacorp stock exploded to make me FI. (These are the reasons you "never" keep company stock - it's too concentrated.) BUT after 50 years, it's been the best mistake I've ever made. (Wasn't it Sheryl Crow who sang "My Favorite Mistake"?)

How's this one: Megacorp "been belly, belly good to me." Though I've pared it and pared it, I think my port STILL has almost 10% Megacorp stock. (ahhh, now I remember): "Why change horses in mid stream?" Forget the mule, it was "horse" I was trying to think of.

Presented as (in the eye of the beholder) a farce or more likely, a cautionary tale but NOT as an apocryphal story. It all (pretty much) happened just this way. So, I don't recommend it, but I'll take it - and YMMV.

 

[Guamaniac]

I have a 70/30 allocation and of that 70 90% is individual stock. All high growth tech stocks that have massively outperformed the market. Not a recommendation for anyone but I found a way to make it work for me.
It's painful at times because it can be down 30% or so with no corresponding dips in the overall markets but that's the price one pays for this kind of performance. Most people eschew this route because it rarely outperforms the markets and is a lot of work. I happen to enjoy it-for now.

 

[Blue531]

Currently at 63% aggressive growth index funds and 37% one individual stock. The stock was originally only 10% of my net worth but has grown to 37% and will probably be close to 50% before long.

 

[LarryMelman]

Nothing wrong with your goals.
I, on the other hand, prefer stocks (Dividend Kings, Aristocrats) to provide me with a predictable income (trying to stay in a certain tax bracket), whereas Funds and ETF's can be a bit unpredictable on the capital gains side of things. I have about 55% stocks and the rest ETF's and CD's

This is an unpopular opinion but I share it. I was very stridently funds-only (and annoyed by their unpredictable and erratic distributions) until my mid 40's when I first began to consider retirement. How would I derive an income? The only option seemed to be to sell off the funds and be at the mercy of the market for how many fund shares to need to sell each year.

Then I began to learn about Dividend Kings or Aristocrats. Established companies with long records of growing their dividends. I started buying dividend stocks in earnest in about 2012. Actually I already had a few, for example 100 shares of Home Depot bought in 1999, with dividends reinvested, now pay me over $1500 a year. That's only one example.

Buying individual stocks is not hard. You need to devote some time to reading and learning, which anyone in this forum is certainly able to do. Stocks are now 75% of my overall portfolio. I have not bought any funds (except in 401k's) since 2012. Dividends payers and dividend growers. I don't chase tech, I don't chase high yield, I don't trade in and out, and I rarely sell.

I now own about 100 stocks, I basically have my own index fund with a heavy tilt toward growing income. I do not consider this "hard" or beyond the ability of folks who have the time to participate in forums like this.