Does anyone regret not buying individual stocks/staying with index

[jacoavlu]

I was awarded $1000 of IBKR a couple of months ago as part of their welcome program. All I had to do was transfer in $100K of assets to Interactive Brokers. I’m required to hold it for a year. It’s a good reason to hold an individual stock even though I never would otherwise. Fortunately the price has shot up about 15% since I was awarded it. We’ll see what happens between now and the 12 month mark.

If anyone is interested in participating in this bonus I can try to send a referral code. I’m not crazy about holding IBKR stock, but hey, it’s a grand of free money.

The only other time I owned an individual stock is when I was in the process of buying an etf but typed the ticker symbol in too quickly. Sold it three days later after it settled.

would rather have cash and there are usually such bonuses around

[Lithium]

would rather have cash and there are usually such bonuses around

yes, but hard to find a bonus that pays 1%

[jacoavlu]

yes, but hard to find a bonus that pays 1%

true, not always around

[Dont_know_mind]

This Leveraging discussion. Seems unnecessary for doctors and other high income professionals.

We leverage our human capital with loans (mortgage, student loans) early in our life/career and I just don't think we need extra risk. Attempting to become a productive doctor with premed, then getting into medschool, and risking surviving the training and work life is risk enough in my opinion.

The opportunity costs are huge. The risk of failure or unhappiness is robust.

Additional risk necessary for financial gain? I don't think this is wise.

My wife and I are both docs. Prior to age 55 we currently have a net worth over 6M (between 6-9M)

Did we invest in single stocks or index funds with tons of borrowed money?


Nope. We paid off our debt as fast as possible, after maxing out our IRAs

We were debt free within 5-6 years of finishing training.


We paid off a mortgage on a condo in 3 years, rented for a while then paid off our current home in 1 year so now no mortgage, no debt of any kind.

How did we get the big net worth ? (or big in my opinion?)

We did not spend and we saved.

We made most of our net worth with boring old work income + index fund investing.

Our income was great (two doc family) but a big part of it was saving more than 50% of take home.

All our investments have been in boring old index funds. And they have gone up a lot in the last 10 years.

Now the question is: How much money do we need?

Seems like the most important thing for me at this point is not to increase returns but rather to decrease risk.

Our returns for the last 10 years have been a little more than 11%.

I imagine the future will have lower returns (we increased our bond allocation over the last few years) for us but lower risk.

Lower risk and lower return = smoother ride, and I am happy with that.

My health is more important than making more $. My family, my credibility, my sense of well-being, etc. All more important than being ridiculously rich.

What the heck would I do with 5x? Charity sure, but is it worth the personal risk?

Larry Swedroe in his books tells a story of a dude who had 13M in the late 90s. All his money was in dot com ( .com) stocks. In the late 90s this dude's wife told him to decrease risk. She told him to buy some bonds and decrease his stock allocation. So the dude talks to his AUM fee advisor.

His "advisor" told him stay invested in the stocks. You are killing it! You are doing great!

He lost 11M and went from 13M to 2M.

after having just 2M, he met Larry.

Larry asked the guy: "did you want to double the 13M? I mean would you have felt different with 26M vs 13M"

The poor guy and his wife said they would not have felt any different with 13M vs 26M but now that they had lost down to 2M they felt awful.

The lesson for me is simple: DON'T LOSE.

I am gradually increasing my bond allocation. I have a paid for house (paid off my house instead of buying more stocks) and I owe no one.

Don't lose.

Great points Tangler.
There is much wisdom in what you say.

I have to say I do get swayed by the temptation to the leverage dark side.
It's amazing how you can rationalize almost anything.
I think if you do use leverage you have to expect to be burnt badly at least once with it.

So 2 sides to the argument:
- You can apply a small amount, say 10-15% of your net worth and the downside hopefully doesn't make that much difference if you lose
- If you are into optimizing, arguably you have a stable income as a physician that can be used for leverage and maybe it's a waste not to use it
- interest rates are low

Other side
- The extra return mid or late career may not be enough to move the needle much if you apply sensible amounts of leverage
- The SP500 has had an amazing decade, maybe the downside is more than the upside
- Why add stress to your life when you have enough. If you haven't been burnt by leverage, why seek it out now ?

I have to say I struggle with both sides.
I have certainly lost in the past to badly applied leverage, so have a healthy respect for the risks.

I do play at the moment. I think mainly because it fascinates me and I think I'd like to have another go.
But I leave the levered amount to below an amount I can comfortably cope with losing.
The debt keeps me working and maybe that's not a bad thing.
If I didn't have any debt, I'd be too prone to saying FU to all the work related frustrations.

[Hatton]

This Leveraging discussion. Seems unnecessary for doctors and other high income professionals.

We leverage our human capital with loans (mortgage, student loans) early in our life/career and I just don't think we need extra risk. Attempting to become a productive doctor with premed, then getting into medschool, and risking surviving the training and work life is risk enough in my opinion.

The opportunity costs are huge. The risk of failure or unhappiness is robust.

Additional risk necessary for financial gain? I don't think this is wise.

My wife and I are both docs. Prior to age 55 we currently have a net worth over 6M (between 6-9M)

Did we invest in single stocks or index funds with tons of borrowed money?


Nope. We paid off our debt as fast as possible, after maxing out our IRAs

We were debt free within 5-6 years of finishing training.


We paid off a mortgage on a condo in 3 years, rented for a while then paid off our current home in 1 year so now no mortgage, no debt of any kind.

How did we get the big net worth ? (or big in my opinion?)

We did not spend and we saved.

We made most of our net worth with boring old work income + index fund investing.

Our income was great (two doc family) but a big part of it was saving more than 50% of take home.

All our investments have been in boring old index funds. And they have gone up a lot in the last 10 years.

Now the question is: How much money do we need?

Seems like the most important thing for me at this point is not to increase returns but rather to decrease risk.

Our returns for the last 10 years have been a little more than 11%.

I imagine the future will have lower returns (we increased our bond allocation over the last few years) for us but lower risk.

Lower risk and lower return = smoother ride, and I am happy with that.

My health is more important than making more $. My family, my credibility, my sense of well-being, etc. All more important than being ridiculously rich.

What the heck would I do with 5x? Charity sure, but is it worth the personal risk?

Larry Swedroe in his books tells a story of a dude who had 13M in the late 90s. All his money was in dot com ( .com) stocks. In the late 90s this dude's wife told him to decrease risk. She told him to buy some bonds and decrease his stock allocation. So the dude talks to his AUM fee advisor.

His "advisor" told him stay invested in the stocks. You are killing it! You are doing great!

He lost 11M and went from 13M to 2M.

after having just 2M, he met Larry.

Larry asked the guy: "did you want to double the 13M? I mean would you have felt different with 26M vs 13M"

The poor guy and his wife said they would not have felt any different with 13M vs 26M but now that they had lost down to 2M they felt awful.

The lesson for me is simple: DON'T LOSE.

I am gradually increasing my bond allocation. I have a paid for house (paid off my house instead of buying more stocks) and I owe no one.

Don't lose.

I too have never really gotten into leverage. I think it would make me nervous. I have strayed into individual stocks but indexing is much easier on the nerves. Even after retirement You need some risk in the form of equities. I shoot for the traditional 60/40 portfolio but the equity keeps creeping up. I feel blessed because I have reached a place where I feel like I have enough to live on without worry. Some people never feel this way and I feel sorry for them. In fact I am dating a guy worth about 13 million who does not think he can retire. Being happy with what you have is pretty rare I think.

[Hatton]

Great points Tangler.
There is much wisdom in what you say.

I have to say I do get swayed by the temptation to the leverage dark side.
It's amazing how you can rationalize almost anything.
I think if you do use leverage you have to expect to be burnt badly at least once with it.

So 2 sides to the argument:
- You can apply a small amount, say 10-15% of your net worth and the downside hopefully doesn't make that much difference if you lose
- If you are into optimizing, arguably you have a stable income as a physician that can be used for leverage and maybe it's a waste not to use it
- interest rates are low

Other side
- The extra return mid or late career may not be enough to move the needle much if you apply sensible amounts of leverage
- The SP500 has had an amazing decade, maybe the downside is more than the upside
- Why add stress to your life when you have enough. If you haven't been burnt by leverage, why seek it out now ?

I have to say I struggle with both sides.
I have certainly lost in the past to badly applied leverage, so have a healthy respect for the risks.

I do play at the moment. I think mainly because it fascinates me and I think I'd like to have another go.
But I leave the levered amount to below an amount I can comfortably cope with losing.
The debt keeps me working and maybe that's not a bad thing.
If I didn't have any debt, I'd be too prone to saying FU to all the work related frustrations.

So are you saying that if you paid off your leverage you would not be motivated to work?

[jfoxcpacfp]

I don't want 500k of a 1M portfolio in 1 stock!

Couldn’t agree more.

[CordMcNally]

In fact I am dating a guy worth about 13 million who does not think he can retire. Being happy with what you have is pretty rare I think.

If he spends $1M a year then he may be right.

[Tangler]

So are you saying that if you paid off your leverage you would not be motivated to work?

Unfortunately I think a lot of folks are essentially indentured servants. Some docs too. (Not sure about OP, just an observation of my family and colleagues)

[VentAlarm]

None of the rich people I know use leverage outside of real estate.

[Jack_Sparrow]

This Leveraging discussion. Seems unnecessary for doctors and other high income professionals.

Larry asked the guy: "did you want to double the 13M? I mean would you have felt different with 26M vs 13M"

The poor guy and his wife said they would not have felt any different with 13M vs 26M but now that they had lost down to 2M they felt awful.

The lesson for me is simple: DON'T LOSE.

I am gradually increasing my bond allocation. I have a paid for house (paid off my house instead of buying more stocks) and I owe no one.

Don't lose.

I think this is a great post. It would be curious to me though to try to better understand everyone opinion in terms of their risk tolerance vs age vs life goals vs existing nest egg. I mean for example the OP has a nice retirement egg and is at a point in life where they could retire. Why risk it? Seems like a no brainer. But...

Take someone like me 32, first few months out of residency, making 300k, have 300k net worth. I'm a pro stock picker for sure. I've beaten the S&P since I started investing in 2012. ( Yes I have run the calculator that determines if I just bought the S&P every time I invested into my account (including dividend) vs what I have in my account now and tax loss harvesting.)

I feel like I can risk it all because I can. If I lost it all tomorrow, I would cuss, blame everyone but myself (narcistic personality and all) then I would start over, just indexing and not change anything about my day to day spending. and still end up with a comfy 5-7 million at retirement @ 60-65. But as it is. I feel like I'm fairly far ahead and can shoot for the 10-14 million retirement and/or the 5-7 million and retire by 55. Not to mention stock picking is fun. As some of the poster alluded to its pretty easy to pick the market disrupters in my opinion.

10 years ago I knew AMZN was going to replace retail. Now look there are plenty of examples of market distrupters;

Zillow - going to replace realtors.
AIRBNB, going to replace hotels,
Video games/youtubers going to replace sports athlete markets. (Shift from football/basketball to video games), buy NVIDIA, AMD, Blizzard, etc.
Economy is going to become more "gig", see ETSY of the world, so I'm betting on Square.
Disney is going to keep cruising. (25 yrs of targeting their audience who now has the money to buy all their stuff, see their moves, etc.

Also for the indexers, I can also tell you what I believe is on their way out or at the least only going to keep up with inflation and not beat the market (but is still part of the index) ..
- Newspapers,
- Big News Networks in general.
- Big retail
- Hotels
- Oil
- Super high end jewelry
-Door dash - This is going to crash so hard, terrible business model.

[Anne]

I think this is a great post. It would be curious to me though to try to better understand everyone opinion in terms of their risk tolerance vs age vs life goals vs existing nest egg. I mean for example the OP has a nice retirement egg and is at a point in life where they could retire. Why risk it? Seems like a no brainer. But...

Take someone like me 32, first few months out of residency, making 300k, have 300k net worth. I'm a pro stock picker for sure. I've beaten the S&P since I started investing in 2012. ( Yes I have run the calculator that determines if I just bought the S&P every time I invested into my account (including dividend) vs what I have in my account now and tax loss harvesting.)

I feel like I can risk it all because I can. If I lost it all tomorrow, I would cuss, blame everyone but myself (narcistic personality and all) then I would start over, just indexing and not change anything about my day to day spending. and still end up with a comfy 5-7 million at retirement @ 60-65. But as it is. I feel like I'm fairly far ahead and can shoot for the 10-14 million retirement and/or the 5-7 million and retire by 55. Not to mention stock picking is fun. As some of the poster alluded to its pretty easy to pick the market disrupters in my opinion.

10 years ago I knew AMZN was going to replace retail. Now look there are plenty of examples of market distrupters;

Zillow - going to replace realtors.
AIRBNB, going to replace hotels,
Video games/youtubers going to replace sports athlete markets. (Shift from football/basketball to video games), buy NVIDIA, AMD, Blizzard, etc.
Economy is going to become more "gig", see ETSY of the world, so I'm betting on Square.
Disney is going to keep cruising. (25 yrs of targeting their audience who now has the money to buy all their stuff, see their moves, etc.

Also for the indexers, I can also tell you what I believe is on their way out or at the least only going to keep up with inflation and not beat the market (but is still part of the index) ..
- Newspapers,
- Big News Networks in general.
- Big retail
- Hotels
- Oil
- Super high end jewelry
-Door dash - This is going to crash so hard, terrible business model.

I think you can fairly easily (barring severe longstanding economic disruption which will through you off course either way) end up with 5-7 million (or more) at 55 (or younger) with either path—stock picking or indexing, as long as you stick with a stable consistent path. You clearly like stock picking, so if you index you will constantly second guess yourself and that will cut down on your ability to be consistent. I’m the opposite, I would constantly second guess if I tried to stock pick, so I have indexed and been consistent with my investing patterns. I wouldn’t enjoy the extra time and effort that stock picking requires either so there is no point in my doing it. I have no idea if I would have more or less if I had stock picked rather than indexed, nor do I care, as I prefer just being happy with what I have (see Hatton’s comment above).

I kind of feel like those that index have a higher likelihood of going with the flow and staying the course better than those who stock pick, because to index is to admit you don’t really know what’s going to happen, you are just trusting in the economy in general, where stock picking introduces ego/need to be right or know more than others to the mix, and then when unforeseen events prove the stock picker wrong, the need to preserve ego leads to mistakes. I think the ability to separate your ego from your portfolio performance goes a long way.

[Lordosis]

I was not investing in the nineties but I imagine a lot of conversations like this.

[Dont_know_mind]

So are you saying that if you paid off your leverage you would not be motivated to work?

It's a rationalization.
I have been saying to myself that I might have stopped at one of the workplaces I work at mid this year if I didn't have debt, but I don't know.
Having debt does psychologically make me more keen to work.
I was down to 3.5 days a week before Covid.
Since Covid and acquiring debt again, I've been back to 4 days a week.

Thinking about it more though, probably the main thing that keeps me from working less is not having a diversified portfolio and that is probably more of an issue for me than the debt I have.

[Tim]

None of the rich people I know use leverage outside of real estate.

I know one guy that leverages to the max on his private investments. Partners on every deal with each partner picked for specific reasons. He has the cash, but really is tight on tying up the funds.
He is very willing to bankroll, but prefers to guarantee 100% of the secured debt for a much smaller cash down. Never looks at partners for cash calls. Of course his “stock” took is 10 digit hit in 2008. Never sold a thing. Just his MO.