Rookie question here: if funds are a group of stocks and lower your chances of losing your investment. Why would anyone purchase individual stocks? (Especially the funds that have monthly dividends) is there more to funds that I’m missing?
Scott Woods: they take a %
Jeremy Lvancevic: A very very small fraction that in most cases isn’t too bad.
Brad LaChance: I think funds are a great easy way to get into the market without having to do hours of research, but they do charge an expense. If you pick an individual stock and do your research you can achieve better gains than a fund. Funds are going to have winners and losers so it balances out which leaves some profits off the table for you.
Helen Sriubiskis: With funds and ETFs, you get the great performer as well as the poor performers as part of the package. With individual stock selection, you get to “cherry pick” the best stocks that meet your individual criteria.
Dave Shaheen: They reduce risk, but limit upside/downside
Helen Sriubiskis: If you buy high quality stocks (the ones most frequently discussed here), there is generally no chance you will “lose your investment”.
Helen Sriubiskis: JNJ, KO, T, VZ, V, MA, MCD, etc., etc. will be around and doing well long after I’m gone, and maybe you too.
Ben Blankenship: Carefully selected stocks will outperform most funds!
Jeremy Lvancevic: Index funds and or most mutual funds out perform 99% of people on this page. So don’t hesitate to buy them and go enjoy life. I only buy my own stocks on occasion for entertainment purposes or when I hear other “professionals” buy them lol
Helen Sriubiskis: This year is one exceptional year where merely owning ETFs that mimic the DOW, S&P500, and NASDAQ would have resulted in phenomenal returns.As of Friday’s close: Dow YTD +23.11%, Nasdaq YTD +27.07%, S&P YTD +18.43%
Hank Hopkins: If you pick stocks you will be missing the fees and distributions associated with funds.
Helen Sriubiskis: If you pick stocks you will avoid the fees only. .
Melissa Dawson: I like safe…don’t like fees. What do you mean when you say missing the distributions? Some stocks have dividends. Are their other distributions?
James Lam: I don’t like fees either. If you are in the UK, sign up for freetrade.io. They promise to have no fees.
Hank Hopkins: Mutual funds have fees, typically 1% of your total investment. They also have year end distributions that you must declare as income and pay taxes on. You have neither with stocks.
Xavier Villegas: Individual stocks are for the risk takers that do alot of research. Indiviual stocks when they do hit will gain more then a fund. Funds are just safer
Steve Porter: Look at vanguard etfs. Great track record, some VERY low fees. Buffett has great things to say about them. Risk tend to be higher in individual stocks although returns can too.
David Nicholson: You can increase your effective yield of your dividend portfolio by writing covered calls on your individual stock holdings, something you cannot do with mutual funds.
Steve Porter: ONLY if you own 100 shares of a company
David Nicholson: Yes, if your dividend portfolio is big enough, you should be buying in lots of 100 and writing covered calls. It’s virtually free money.
Darren Yoelin: You can write covered calls on ETFs
David Nicholson: Darren Yoelin I did not know that — which ones?
Darren Yoelin: Ones with enough liquidity that offer options. SPY is popular to write options on
Austin Sissel: Hi David.. whats your best strategy for this free money?
David Nicholson: Pretty simple. Write covered calls on your dividend stocks, about 3 months out, 10% out of the money to get a moderate premium and somewhat unlikely that you will get called and have to sell. If you do have to sell, then you’ll take a profit and have to pay tax if its an aftertax account. Roll the money back into another dividend aristocrat. Rinse, repeat. Free money on the stocks you’re already holding.
Darren Yoelin: It is definitely not “free money.” Options are highly risky. Selling covered calls is less risky, but there is a chance that the stock you own could shoot up in price and you can’t participate in the upside, or the stock could plunge and you are forced…See more
David Nicholson: Darren Yoelin You are mis-stating the risk profile for the typical S&P500 dividend-yielding stock. When is the last time Exxon gained more than 10% in a quarter? That’s what it would take for the option to get called, if you are writing your calls 10…See more
JB Kemp: But can Etf’s Which are electronic traded funds.
Darren Yoelin: Covered calls are less risky than most options. But there is no such thing as “free money” in the stock market. I firmly believe novice traders shouldn’t be trading options anyway.
Darren Yoelin: If they are interested, they should start to do a lot of reading. It took me a lot of studying to understand options.
Dawud Joseph: How
Ray James: funds aren’t as sexy and they cost a fair amount. You can brag about buying a stock low.Ultimately, smaller accounts probably need to favor packaged products simply because of the diversification issue.
AJ Singh: I have a mix bag and it has worked great for me. Plus when I do buy individual companies I do look at what the ETFs and REITs are holding along with the likes of WARREN BUFFET & BILL GATES holdings. Why reinvent the wheel. ?Here are few of mine- JNJ KO T VZ MA XOM BAC BA LMT XLK VNQ XLV VOX SPY VOO.
Chad Touchberry: Lower yield + expense ratio. For what? Look at the top holdings of these dividend indexes. Nike, microsoft, union pacific, visa, coca cola, johnson & johnson, MMM, – one does not need to be a genius to pick such companies for self-ownership.
Jeanie Welton Knapp: You can create your own fund and diversify it, to lower your risk and manage it yourself. And save the management fees.
Jeremy Lvancevic: Are you that confident you can out perform the market? I used to think that but in reality, most wont. And if you can, you should probably go work for an investment firm and make $500,000 a year.
Jeanie Welton Knapp: Jeremy Lvancevic Well I am outperforming the market, but that was not my point. You can look at funds and see what they own and create your own. This is simply my thought and did not require a discussion.
Chad Touchberry: Why does the goal have to be to outperform the market? If one is investing for retirement, what one needs is income replacement. You are only thinking about the capital gain by thinking of market performance. The dividend provides the income replacement.
Jeremy Lvancevic: Jeanie Welton Knapp Short term I am sure you do. But show me a 3-5 year snapshot and I will bet you aren’t. Sorry. It’s a delusion that too many people suffer from.
Jeremy Lvancevic: Chad Touchberry Exactly. So long term it would be best for people to passively put away money into an index to truly avoid risk. They can then use saved funds to buy a bulk of income creating dividend stocks.
Jeanie Welton Knapp: Jeremy Lvancevic Not everyone has to do what you do. Some people like to work outside the box. The OP asked a question and has been given may options. I’m not questioning your method so why are you questioning mine? BULLY
Jeremy Lvancevic: Jeanie Welton Knapp You take it personal when it’s supposed to be beneficial for others. Sorry to offend, but simply saying “ah hell start your own fund and your good to go!” Is just silly.
Chad Touchberry: Jeremy Lvancevic If buying individual stocks is risky why would one use saved funds to buy them in retirement? If the goal in retirement is to buy dividend paying stocks, why not start buying them now and capture a higher yield on investment and buil…See more
Jeremy Lvancevic: Jeanie Welton Knapp you need to go read the original post again and really think about it and understand what this person is saying. Good luck, bye
Jeremy Lvancevic: Chad Touchberry obviously you missed the entire point. I never once said individual stocks are risky. It’s about long term performance. Please read again then comment.
Chad Touchberry: Jeremy Lvancevic “So long term it would be best for people to passively put away money into an index to truly avoid risk.” You brought up the risk dude – not me.
Jeremy Lvancevic: Chad Touchberry You assume risk is all about losing money. Lost money can also come from missed gains. Example, buying blue chips and averaging 4% vs 7-8% a year in an index over 30 years. Go to your local community college and take Finance 101 before you go any further and bury yourself
Chad Touchberry: Yeah, because indexes never under-perform the market? Arrogant much?
Jeremy Lvancevic: Chad Touchberry nice you picked ONE that you could find to try to make yourself relevant? Get out of here lol. I hope your not over 16. Good luck in life, kid
Joel Shankster: Jeremy Lvancevic. Why do you have treat others so poorly? Jeanie Welton Knapp simply answered the posted question and you ripped her apart. We don’t need online BULLIES in this group.
Chad Touchberry: The best part is he blocked me… 😀
Adam Keshen: The risk and reward are higher by owning individual stock. I recommend owning both. Take Boeing for example, name one ETF or Mutual Fund that was up 80% YTD…
Chad Touchberry: Unfair comparison – as your collection of assets also wouldn’t be up 80% either.
Adam Keshen: I wasn’t making that comparison, unless your entire portfolio is one ETF or Mutual Fund.
Michael Dickson: Remember funds have the winners and the loosers in 1 basket.
Chad Touchberry: So do you though right?
Michael Morse: Build your own fund.
David Boyd: ORC
Milton T Eaton: On my Vanguard funds the expense ratio is tiny. I have about 50% funds and 50% well diversified individual stocks. My funds out perform most of my individual stocks but not all. 401K accounts generally are funds so count that. Also I consider Social Security as basically bonds.
Milton T Eaton: With Vanguard all my purchases are commission free. I also have the ability to invest as little as $1 in my accounts.
Darren Yoelin: I invest in individual stocks because there is greater upside. There are many stocks that have appreciated 100X or more… (Apple, Nvidia, Southwest Airlines, Coca Cola, L Brands, Monster, etc.)Good luck finding a fund that returns 10,000% on an investment.
Randhir Agarwal: Look at stocks where you invest based on your research and your risk assessment. I use funds to overweight some specific stocks and also because I cannot research all stocks and sectors and depend on the professionals to utilize their background
Mark McMillan: The simple answer is that you need to have both in your portfolio.
Brian Fey: Lots of reasons. First of all, these “Funds” make money by charging you a percentage of the account. These funds seem small, 2-3% but over time they really add up. And the 2nd reason is, IF you’re really good, single stocks can blow these funds away in returns, IF you’re good enough.
Jeremy Lvancevic: Key word may be lucky instead of “good”.
Brian Fey: Jeremy Lvancevic maybe for some people. But for others, it’s not luck, it’s skill.
Gar Fai Pang: Because we seek alpha.
Brandan Cromartie: Control.
Paul Poirier: Funds charge you a fee to manage your money. So if you invest say 1,000 dollars with a fee rate of 1% you will pay the manager 10 dollars to manage your money that year. But as your fund value increases he is still charging you 1% of your funds value every year. So say in 5 years the value is now 5,000 dollars they are charging you 50 dollars to manage your money, which eats into your profits. Here is the big kicker, if your fund value drops say from 1,000 dollars to 800 dollars they are going to still charge you the 1% management fee of 8 dollars adding to your losses. They never lose because they pay themselves whether they make you money or not. So look for funds with the lowest fees and no front loading costs. Do more research and educate yourself so you don’t get blind sided.
Deuel Stephens: I’m a rookie as wellExpense fees….. I have 403(b) and man if I knew better I would have started doing it on a loooong time ago.
Botao Jiang: I hate choosing funds, I can’t even chose stocks easily. I’m amazed how people just say buy a fund.Funds only work long term
Tom Gianni: that’s not a rookie question,,,,,however not sure I could answer, nothing is safe,