I am even older than Vagabond so I used to think I was a great stock picker. Maybe I was or maybe it was a roaring bull market. Now the only individual stock I own is Apple. It is certainly possible to make lots of money investing in individual stocks but it is also very time consuming if you do it right. Now I follow the market but only for general trends.
was just wondering as i’m working my holiday shift….investing in vanguard mutual funds vs trying my hand at individual stock picking? (i.e., loading up on apple, target, costco, etc…as well as some smaller companies)
thoughts? what do you folks do?
It comprises about 0.1% of my net worth and allows me to scratch that itch.
I believe the data which says the index funds, over time, will always beat the stock pickers.
It comprises about 0.1% of my net worth and allows me to scratch that itch.
I think it’s fine to pick so long as you keep the %/$ very low. (aka you’d be okay to lose every penny of it).
The way I think of it is that with an index fund I get to buy a small piece of virtually every company on the S&P 500, Nasdaq, etc. There’s no way I’d be able to afford that kind of diversity if I were to try to pick my own stocks individually. Someone like Warren Buffet can do that, of course and a single share of Berkshire Hathaway is a pretty good sampling of the S&P 500, but…for us average investors, index funds are hard to beat.
If you have an urge to pick stocks, one thing you can try is to dedicate a small amount of money towards picking individual stocks in one of your accounts. Call it play money if you want. I’ve heard of a lot of people doing this. I have about $5,000 in my Roth that I use for that purpose. It can satisfy that urge to actively buy and sell something without doing any real damage to your long term goals. Since individual stock picking is so risky, I should probably use part of my taxable account for that purpose instead of my Roth now that I think about it so that I can tax loss harvest if I lose my $5,000 on something.
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