Researching Individual Stocks. Worth the Trouble?

[bjl584]

Do you buy individual stocks based on your own research? Do you think it is effective? We hear a lot about how even the pros can't beat the averages, and they are supposedly the professionals doing this for a living. They are armed with every detail imaginable about a given company, and have access to some of the world's most powerful computers and algorithms. And even they have trouble beating the averages. So, what are you looking at when you do research? Are you getting recommendations from an advisor, or are you truly doing your own research with whatever tools you have available?

How are you performing?
I know in the current environment almost anyone can make money with almost any stock pick. But, what about during market downturns?

Are we all wasting our time?
Are we better off just buying index funds so we can focus our energies someplace else?

[james.hendrickson]

Great question. I get it that a lot of investors feel that index and mutual funds are the way to go...but I never really heard a good answer from fund owners as to why value investors have a slight margin in returns over practitioners of other investing perspectives.

[corn18]

I stick with index funds because I don't have the time or ability to out research the experts. The few times I have tried it in the past, I was either flat out wrong, or I got scared and bailed at the wrong time. Just not something I am good at.

I also find it reassuring that 80% of the expert mutual fund managers that actively manage their holdings cannot beat my index fund.

I do enjoy hearing success stories for those that do actively trade. I wish them the best of luck and hope they beat the odds.

If I were to invest significant time in my investing, I think I would go the TexasHusker route and own a business and/or do real estate investing. I could get my head around that a lot easier than trying to understand why and when stocks go up and down.

[Fishindude77]

A whole lot of people have made a whole lot of money buying & selling individual stocks, and that is exactly what those that direct & manage your mutual funds and index funds do.

The average guy is afraid of individual stocks because it is "putting all your eggs in one basket" where with a mutual fund you investment is spread out over many different stocks. Pretty unlikely every stock in a good fund would take a dump all at once.

[disneysteve]

I own individual stocks. I own actively managed mutual funds. I own index mutual funds. The individual stocks are not a big part of our portfolio and I'm not actively buying more. The ones I have I've owned for many years, over 30 in one case.

Buying individual stocks isn't tremendously difficult but it's definitely not as hands off as index or even actively managed funds.

[james.hendrickson]

Disneysteve - what stock have you owned for 30 years?

[disneysteve]

Disneysteve - what stock have you owned for 30 years?

Disney 😉

[james.hendrickson]

Disney 😉

Of course. I have some Disney shares as well.

[Tabs]

I hobby trade individual stocks from time to time. It helps me stay engaged with what's going on in the financial world, and even make a little money on the side. I am not as active as I used to be, but I'm always on the lookout for a good value, and securities in general are no different.

No, I don't think it's effective, but again, I mostly do it for fun and learning more than anything.

Overall, no, I don't believe that even the pros can beat the averages, and even with those that do, it's usually not worth it for us customers after the expense ratios are taken out.

Most trading firms that are making money are mostly doing so with super fast trading computers. What the actual pick is doesn't seem too relevant depending on the algorithm.

But that doesn't mean I won't look around, or that there are no good deals around. These days, I'm keeping an eye on the corporate-friendly political climate (a la Trump tax cut) and who benefits (large corporations with a lot of oversea funds, banks and financial corporations, international companies), the fact that we are still at historically low federal interest rates and its eventual but imminent interest rate hike, and who would benefit from that (again, banks and financial institutions), and even the repeal of Net Neutrality (which benefits large telecoms). Also, the stock market has been on a bit of a bull run lately. It's not a problem though, since the Feds can always just hike up interest rates to dampen the bubble effect, but because of that, I also believe you'll want to stay defensive on your picks.

All of this is not speculation. It is a fact of life. My question then is, well if this is how it has to be, how can I at least make some scratch from it? So, that's my stance on it.

Most of my money is still in passive index funds.

[~bs]

I tried it, but for me no. Was never good at it, so why waste my efforts trying to beat the market when my time is better utilized elsewhere?

I'd also like to caution that if the stock market direction is going up, it's quite easy for any amateur investor to make a winning portfolio. Just like in a hot real estate market, even mediocre agents can make a sale here or there. dot com bubble, hell, everyone's a stock maket professional. It's when the market is flat or downward trending do you find out if you're actually good (and can beat the market).

[LivingAlmostLarge]

We used too and I've left our individual stocks alone period because we can't tax harvest and get out of them without paying a lot right now. In the future we'll consider it. Until then I'm done.

So um we lost 6 figures trading oil about 3 years ago when oil went in the toilet. That was the end of trading for my DH. and yes he did make quite a bit, but he lost a heck of a lot of money.

So right now we are sticking to etfs and buying sectors for diversification and risky plays. I own REITs and international and small caps. I am also looking for a commodities ETF.

Next up I think a rental property to diversify our portfolio. Looking big picture we're pretty good diversified. We are also balanced properly with bonds. I am also looking at adding individual bonds instead of our bond index we can probably do $100k which is enough to properly start our own bond portfolio.

So rental and individual bonds.

[msomnipotent]

I do ok, but I only play with a few thousand dollars. I don't rely on pros at all because every time I did, I got burned. They love to tell you when to buy but they never mention when to get out. I read the news, watch some investment shows, I look around, and I search the internet. Stocks that people hate really interest me. I don't worry about short term capital gains because it is small potatoes for me at this point.

[Like2Plan]

There are some things I like about owning individual stocks. One thing is the ER is $0. Also, it is rare to have an unexpected capital gain event. (I like the stock certificates. )

But, I am not good at owning individual stocks. I really did myself a favor by selling all but 2 stocks and putting the proceeds into low cost index funds.

[Gailete]

I own individual stocks. I set myself some parameters before buying them. They had to be something I knew, used or was fairly well acquainted with. For instance Hershey. It would have been a toss up between Hershey and M&M but I believe M&M isn't public. I bought my initial shares at $48. I also wanted stocks that paid dividends as I knew I didn't have a lot of time or money to accumulate money towards retirement. i also wanted to buy and hold. If and when I get to 100 shares of any one company then I was done buying that and I could start buying into a new stock. I varied from my plan once and two years later I sold what I had, and even with dividends, I sold at couple dollars less than what I had originally paid. One stock is way down, but I am at the point I am still adding at least one or more shares via dividends. They have one of their big plants in my area, so news about them I figure I will hear about and really bad news as it becomes public. I hold the most shares in my local bank that I use. I am a very satisfied customer.

However, I do own mutual funds for my IRA and also as part of my Roth IRA was well as now buying any shares of stock when I can afford them by way of my Roth IRA so that I don't have to pay taxes on the dividends on them. It may not seem like much to some but the furthest back i remember is having to declare $75 in dividends. As the dividends kept rising it finally dawned on me that I could just invest via my Roth IRA and avoid losing to the taxman. We live on a limited income so the more we can avoid paying even $5 or $10+ in taxes, the better for us. Last year I was very pleased by my returns on those two accounts and the IRA accounts that we had started long time back. I realize that things can go up and down and all around with the stock market, but I am happy to see some success with my investments over the years.

As to time consuming, I didn't find it to be so, once I decided what I wanted to do. I did initially invest in a target fund using a date about ten years past what would be my normal retirement age as I knew I needed to accept more risk to make more. For some reason they closed those accounts so I had to pick another fund to invest in.

My best stock that I ever invested in up to Hershey's, was a local company that had been owned and run by the same family since it was founded. When the last family member got to retirement age they sold the company and my shares were changed into cash that I had to reinvest in something else. One of the biggest reasons that I had picked the company was from a newspaper article where they interviewed an employee who had been there for decades and couldn't say enough good things about the company and how much she loved working there and how well the company treated it's employees.

[kv968]

I do own individual stocks in my both my taxable and non-taxable accounts but the majority of my money is in either index or mutual funds. And since the amount that I do invest in individual stocks is so small compared to the overall amount, I find I do more "trading" than the usual buying and holding. Kind of like the "fun" part of my account if you will. However I must say it seems that the stocks that I have just bought and held have done much better over time than my trading portion has. And I probably also would have been better off just holding those trading stocks for the long term as well instead of trading in and out of them

One thing I do use with a pretty consistent success rate in a pension I rolled over is options. Not so much buying them but selling them. It's definitely not a "get rich quick" way of making a return but it's relatively safe (if you know what you're doing) and can be pretty consistent. The problem with options however is much more time is needed to devote to the process, which I don't always have, so unfortunately that portion of money just ends up "sitting there" doing nothing if I'm not actively trading.