[disneysteve]

BA - I think trading stocks is fine as long as it is done as a small part of an overall investment plan. Taking 5-10% of your money for dabbling in stocks isn't such a bad idea. I own some individual stocks that I've had for years and I periodically go through a trading phase. Even though well-respected magazines like Money and Kiplinger's give the traditional advice of investing in low-cost mutual funds, index funds, etc., each issue still has several articles about individual companies and their prospects.

And if you have enough money to be well diversified, you could do just fine with a portfolio of nothing but individual stocks. It isn't a way to start out because you wouldn't have the funds to do it right, but you could certainly get there eventually.

That said, I think many people's first entry into the investment world comes through the purchase of a single stock. My very first investment was a few shares of Disney stock. Did I have a well-balanced, diversified portfolio. Nope. But I think the best way to gain an understanding of how the market works and how various factors influence prices is to follow one or two companies. Buying a mutual fund that holds dozens or hundreds of stocks doesn't provide the same lesson.