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I only buy individual stocks. I never felt comfortable owning the entire market. I don’t know how to value the market as a whole. I don’t think of my investments as stocks, but as ownership interest in the underlying business and I like knowing what I own. Unfortunately, it still seems impossible to avoid bear markets and short term share price declines. However, owning individual companies helps me stay the course in bear markets because I stay rooted in the business fundamentals and don’t worry about overall market level.
I buy cheap index’s, and try to stay as diversified as possible. Keep percentages appropriate within my 55 to 45 (stocks &
fixed income).If there’s a dip in the market or a certain index takes a dive ill look to take advantage.
I make one decison – when to buy a stock. This is primarily based on quality and valuation. I never sell so that part does not matter. If I consider an index fund fairly valued I’ll buy it but that has not been the case in a while.
I’m confused by your claim that you never sell a stock. Do you really believe that your stock picks will never falter or become overvalued?
I can understand never selling a broad-based index fund since it will self-adjust to changes in the market, but an individual stock?
The fund that has not changed positions since 1935 is doing quite well.
I happen to believe that a portfolio is like a bar of soap and must be handled minimally. If one of my holdings becomes overvalued or goes bankrupt, so be it. I have a portfolio that is very diverse.
Generally no; however, I enjoy the process of researching individual companies and it is important for me to know exactly what I own. Perhaps it is illogical, but I don’t trust the market as whole to be fairly valued.
I think it’s a personal question. My issue with owing stocks are when to sell, which I’ve never figured out so mutual funds for me.
Generally no. Mutual funds, especially index funds are what most average investors (or more accurately savers) should stick with.
Absolutely. I had a lump sum to invest in 2018 and did not want to buy index funds in a very overpriced market. I started buying fairly valued companies with long histories of growing their dividends. I have now built a reliable and growing dividend stream. During the crash in March 2020, I bought some more, increasing my yield on cost.
My retirement funds still have indices, but I don’t ever plan to sell my individual stocks. The stock market is a market of stocks and there are always some excellent companies on sale.
Most people will have satisfactory returns investing in a few well diversified index funds. It is possible, if you do your research, to find two or three individual stocks on a yearly basis that have very compelling value stories. These are the stocks that can double, triple or even return 10x on capital over a few years. Not every stock has this potential but a few do. Just last year, the XLE oil index ETF sold in the $20 range and recently recovered to the $58 range, for example. It sometimes pays handsomely using value investing techniques. Peter Lynch’s book One Up on Wall Street has dozens of stories on stock picking that will help you learn.
Investors as a whole are not compensated for the risk they take when buying individual stocks. The risk/reward tradeoff of a low-cost market index fund is far superior.
Nope. Why own just a few when you can so easily buy your share of the earnings of many companies?
A cheap, broad stock index fund + lazy compounding + time = wealth.
No, in general. Since a handful of stocks drive index returns, by definition the odds are against you as you pick a few stocks to buy. We don’t know what tomorrow’s winners are, but we know they will be a tiny minority of the stocks available to buy.