Individual stocks

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Mario2222
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Individual stocks

Post by Mario2222 »

Is it a good idea to own some individual stocks in a taxable account portfolio?
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David Jay
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Re: Individual stocks

Post by David Jay »

Compared to what?
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alpha88
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Re: Individual stocks

Post by alpha88 »

I'd say in general this forum recommends against owning individual stocks
That being said, if you want to own individual stocks, then, assuming you have already filled your tax advantaged space, then putting your individual stocks in taxable is reasonable.
Explorer
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Re: Individual stocks

Post by Explorer »

BH philosophy shuns individual stocks in favor of broad diversification.

No doubt you read stories like "If I bought 1 share of Amazon in 1997, I would have a truckload of money today.." but it does not take much to learn about fallen angels that made you lose your shirt.

I stopped getting tempted by individual stocks.
InvestorP
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Re: Individual stocks

Post by InvestorP »

I would not invest for retirement in individual stocks. But if you have some play money that you don't mind losing then sure why not.
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Stinky
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Re: Individual stocks

Post by Stinky »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
Are you following the purest BH principles if you own individual stocks? No.

Are there people who generally follow BH principles who own individual stocks? Yes.

You can chart your own course.
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annu
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Re: Individual stocks

Post by annu »

I think maybe OP is interested in tax.implications.
Depending upon stock, many will be giving dividends which will add to your taxeable income. While some might not as much and when you sell the shares, you are taxed on gains.

So no different from holding an efficient etf or fund on taxeable.
I own few shares of cloud security companies in my taxeable, as I know about this field, nothing wrong with that, but it is only part of my investment, bot the main allocation.
pseudoiterative
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Re: Individual stocks

Post by pseudoiterative »

Like a lot of things, the devil is in the details. E.g. What decision process will you use to select individual stocks? What decision process will you use to decide when to buy & to sell? It is a lot easier to make decisions that will under perform passive investment than it is to make decisions that will match or beat passive investment.

Here's an analogy: is it a good idea to start your own business? Maybe, maybe not. It depends. What's your plan? What have you done to increase the odds that you will succeed, or limit the impact in the event that you fail?
SlowlySaving
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Re: Individual stocks

Post by SlowlySaving »

We hold individual stocks in both taxable and Roth IRAs.
rossington
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Re: Individual stocks

Post by rossington »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
If these reasons seem to be a good idea then:
1) No ER with individual stocks to worry about in a taxable account.
2) No forced Cap Gains (as is also the same as index funds).
3) Dividends more than likely will be qualified resulting in lower tax rate.

But you have to ask yourself: what is the reasoning against holding the individual stocks?
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
MathIsMyWayr
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Re: Individual stocks

Post by MathIsMyWayr »

If losing all the money invested in individual stocks will not affect your finance negatively, you may. You put efforts and will see the result. Statistically, your outcome will be about the same as investing passively with indexing, but with a much higher swing. You may have fun and develop an expertise of industry or investment. Life is more than dollars and cents. Again, only if you can afford.
robert_b
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Re: Individual stocks

Post by robert_b »

I always picked the wrong. It is hard for me to resist buying good companies, but I have the experience I went wrong in the past so now I will not, probably forever.
whereskyle
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Re: Individual stocks

Post by whereskyle »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
Too much stress for my taste. Individual stocks are so much more volatile than the market. That volatility presents behavioral risks even when you pick the good stocks. When you pick a bad stock, well that's much worse. Easier to stick with the market. Tortoise beats the hare.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
Misenplace
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Re: Individual stocks

Post by Misenplace »

rossington wrote: Sat Jul 11, 2020 3:20 am
Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
If these reasons seem to be a good idea then:
1) No ER with individual stocks to worry about in a taxable account.
2) No forced Cap Gains (as is also the same as index funds).
3) Dividends more than likely will be qualified resulting in lower tax rate.

But you have to ask yourself: what is the reasoning against holding the individual stocks?
I disagree with point 2.
For example, if a US company is bought by a foreign company, and your appreciated stock is replaced with new stock in the foreign company, you may have to recognize it all as capital gain in the year of the acquisition under section 367(a)(1) of the Internal Revenue Code. I believe that the general rule is that you do recognize gain (but not loss), unless an exception applies. So you have to carefully monitor any such transactions, and get a hold of and read the opinions on tax treatment that may (or may not) be prepared for shareholders.
Also, many times in mergers and acquisitions, you may be issued cash as partial payment for your shares. Just look at the history of Hewlit Packard. There are employee blog posts helping employees track and figure out their basis. See https://www.hpalumni.org/StockDecoder
For the above reasons, I am not inclined to ever buy an individual stock again.
Silverado
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Re: Individual stocks

Post by Silverado »

I’ve enjoyed being in about a dozen individual stocks for the last 18 years or so. They are about 4% of our portfolio now, and should drop slowly more as we’ve turned off reinvestment of dividends (funneled to total stock index now).

All big names, some have done really well..some not so much. GE, C, HOG were among them...only HOG remains as we took opportunities to TLH the other two and dump the few hundred bucks into total stock.

Since getting much more education about seven years ago, mostly here, we stopped adding money to individual stocks.

I am not against someone saying they want to buy a couple stocks if it is a small amount. It can be interesting and educational.
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FrugalInvestor
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Re: Individual stocks

Post by FrugalInvestor »

I would strongly recommend a broadly diversified low-cost and tax efficient index fund like Vanguard Total Stock Market rather than individual stocks.

If you haven't yet posted your portfolio and asked for forum feedback I'd suggest doing that according to the recommended format. Taking a broad look at your investments and goals will help you put together a much more cohesive plan that will likely lead to greater investing success.

See here......
https://www.bogleheads.org/wiki/Asking_ ... _your_post

Good Luck!
Have a plan, stay the course and simplify, but most importantly....Ignore the Noise!
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1789
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Re: Individual stocks

Post by 1789 »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
No it is not a good idea. I would think you don't want to spend any minute of your life thinking how a company stock is doing. If you are interested in particular corner/sector of the market at least buy a basket (a mutual fund or ETF) to minimize catastrophic risks associated with holding single company stock.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
UpperNwGuy
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Re: Individual stocks

Post by UpperNwGuy »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
Which stocks are you thinking of buying?
bondsr4me
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Re: Individual stocks

Post by bondsr4me »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
If you enjoy following your investment in the company, then yes it is a good idea.
You can learn a lot by following a company you invest in and you can have fun doing it.
You may make money; you may lose money.
What you don’t want to do is dump all your savings in one company; that can end up ugly.
A broad index fund/etf is also a very good idea for investing.
Have a plan and follow it.

Good luck.
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Taylor Larimore
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Re: Individual stocks?

Post by Taylor Larimore »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
Mario2222:

In my opinion (based on many years of experience and study) it is a very bad idea for investors to bet on individual stocks. The best evidence is that highly trained, experienced, mutual fund managers are unable to beat a simple total market index fund except for short periods. Studies have shown that those managers that do beat the index in one year are unable to do it in following years.

This is what experts say: viewtopic.php?f=10&t=157391

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Attempting to build an investment program around a handful of individual securities is, for all but the most exceptional investors, a fool's errand."
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cheese_breath
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Re: Individual stocks

Post by cheese_breath »

A lot of people here own over 5,000 individual stocks so they must be good. :confused
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Prettyfrtnt
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Re: Individual stocks

Post by Prettyfrtnt »

Only if the individual stocks are tsla
02nz
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Re: Individual stocks

Post by 02nz »

Individual stocks are orders of magnitude (as in hundreds or thousands) of times riskier than broad index funds. Individual companies can and do go bankrupt, with shareholders wiped out. While there's no guarantee the stock market will always "come back," in the past it always has.
sil2017
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Re: Individual stocks

Post by sil2017 »

I started buying individual stocks this April. It worked for me but I had to monitor it.

Somewhat stressful and time consuming.

I think for extra (?) money account, it would be good. I keep my core in Vanguard total stock market , Wellington and Wellsley.
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happyisland
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Re: Individual stocks

Post by happyisland »

sil2017 wrote: Sun Jul 12, 2020 7:48 am I started buying individual stocks this April. It worked for me but I had to monitor it.

Somewhat stressful and time consuming.

I think for extra (?) money account, it would be good. I keep my core in Vanguard total stock market , Wellington and Wellsley.
If you haven't sold those individual stocks is it possibly too soon to start using the past tense?
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Monster99
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Re: Individual stocks

Post by Monster99 »

Over my investment history, I have made a lot of money with individual stocks.... and lost a lot of money with individual stocks. After doing impartial evaluation of my results compared to my DW 60/40 portfolio (she crushed me over a ten year period) I now only invest in low cost index funds at a AA that's appropriate for my risk tolerance. I find it much less stressful to just own the haystack and take what the markets give...😊
fingoals
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Re: Individual stocks

Post by fingoals »

What about analyst estimates & recommendations? I realize that individual analysts are sometimes wrong. But when particular stocks get a Strong Buy or, at least, Moderate Buy ratings from a majority of relevant analysts, wouldn't such consensus - sometimes overwhelming - of seasoned financial professionals be enough of a basis for relevant decision making of those who decide to buy some individual stocks? Could such consensus be viewed as a mini-proxy of prediction markets that are known for their good accuracy (https://en.wikipedia.org/wiki/Predictio ... t#Accuracy)?
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anon_investor
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Re: Individual stocks

Post by anon_investor »

Mario2222 wrote: Fri Jul 10, 2020 9:33 pm Is it a good idea to own some individual stocks in a taxable account portfolio?
Nope.
jimkinny
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Re: Individual stocks

Post by jimkinny »

If you know something the market does not know then yes, buy an individual stock of the company that you know more about than the generalized market. I do not think that having a feeling qualifies has knowledge.
I have a BIL who inherited some money. He was shorting a well known car company because he thought the stock would go down. It was common knowledge the company was having production delays and not meeting goals.
The stock has done well in the year since that happened and production goals have been met and the stock has gone up.

What do you know that other people don't?
mbasherp
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Re: Individual stocks

Post by mbasherp »

I hold individual stocks with between 0 and 5% of my portfolio, as I see opportunity. I rigorously track my performance vs pure indexing and have beaten the market, although I still won’t allow myself to exceed 5% and I don’t currently see many stocks I want to own individually. I have found that the best time to concentrate risk is during a broad downturn when some individual companies end up dramatically oversold.

I use my Roth IRA rather than a taxable account. No tax considerations help to streamline the process and results. Taxable contains only VTI and VXUS index funds.
sil2017
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Re: Individual stocks

Post by sil2017 »

happyisland wrote: Sun Jul 12, 2020 8:22 am
sil2017 wrote: Sun Jul 12, 2020 7:48 am I started buying individual stocks this April. It worked for me but I had to monitor it.

Somewhat stressful and time consuming.

I think for extra (?) money account, it would be good. I keep my core in Vanguard total stock market , Wellington and Wellsley.
If you haven't sold those individual stocks is it possibly too soon to start using the past tense?
sorry, i have both...sold some for realized gains, have not sold some for unrealized gains
CycloRista
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Re: Individual stocks

Post by CycloRista »

I too have made money and lost some investing in individual stocks in a taxable portfolio (since it was possible to trade online as an individual investor in the mid-late 1980's). In my case, the amount has continued to increase so I have gained more than I've lost but I am not super-rich as a result. Note: trading individual stocks is definitely not for everyone particularly if you lose sleep worrying about daily/weekly/monthly market fluctuations, react poorly to bad news, etc.

I also contributed the maximum to my retirement for >3 decades, along with gaining substantially from a few unanticipated windfall profits (sold an internet domain name for big money among other things). The point here is that I have amassed resources such that I can take more risk on a small percentage of those holdings.

I started off tracking a mock portfolio on paper (before the internet had taken off with all the fancy tracking tools, etc. nowadays). Based on 6 months to 1 year worth of data (where it appeared I had at least some clue as to what I was doing), I decided to try buying a few "real" shares across different sectors. As time went by, I added more and kept going.

I have also invested in individual stocks through brokerage accounts in years past at very specific times. One was when the VMware IPO occurred. I bought it in mid-1999 and decided on my own to sell it in early 2000 (which turned out to be very close to the all time high). I also "won" via a reseller/distribution incentive hundreds of shares of Cisco stock early on that I again decided to sell on my own and it just so happened to be near the all time high.

I'm not over-confident and definitely do not have any delusions that I can "beat the system". I have watched PhD mathematicians, statisticians and colleagues in my field (technology) lose immense amounts of money thinking they knew something unique that gave them an advantage. I do not drive fancy cars, live beyond my means, eat out very often or go on extravagant vacations. Got my kids though college with no debt and owe nothing to anyone other than the mortgage on my primary residence (and only property I own).

More than anything, I guess I enjoy the challenge of seeing what I can do and boil down the massive amount of hype/emotion into something that can be tiptoed upon (like very thin ICE) to invest in small blocks across a number of different industries.
Misenplace
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Re: Individual stocks

Post by Misenplace »

sil2017 wrote: Sun Jul 12, 2020 9:19 am
happyisland wrote: Sun Jul 12, 2020 8:22 am
sil2017 wrote: Sun Jul 12, 2020 7:48 am I started buying individual stocks this April. It worked for me but I had to monitor it.

Somewhat stressful and time consuming.

I think for extra (?) money account, it would be good. I keep my core in Vanguard total stock market , Wellington and Wellsley.
If you haven't sold those individual stocks is it possibly too soon to start using the past tense?
sorry, i have both...sold some for realized gains, have not sold some for unrealized gains
So the gains were short term? Hopefully, you have accumulated losses to offset. Or that you are not in the 22% or higher tax bracket.

I have a friend who does her short term speculation only in an IRA. I see there are others in this thread who do the same.
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arcticpineapplecorp.
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Re: Individual stocks

Post by arcticpineapplecorp. »

how good are you at finding a needle in a haystack?

https://papers.ssrn.com/sol3/papers.cfm ... id=2900447

do you think you can do better than mutual fund managers? (hint: 80% of them underperform the S&P500 index every year).

https://www.spindices.com/spiva/#/reports
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
bondsr4me
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Re: Individual stocks

Post by bondsr4me »

I agree with Jack B.

Jack B. said 5%; no more...the rest in broad index funds.

Here is a nice youtube video with Jack...he was a priceless gem.

https://www.youtube.com/watch?v=6fqT1VJScuc

I hope you enjoy it.

Don
sil2017
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Re: Individual stocks

Post by sil2017 »

Misenplace wrote: Sun Jul 12, 2020 11:31 am
sil2017 wrote: Sun Jul 12, 2020 9:19 am
happyisland wrote: Sun Jul 12, 2020 8:22 am
sil2017 wrote: Sun Jul 12, 2020 7:48 am I started buying individual stocks this April. It worked for me but I had to monitor it.

Somewhat stressful and time consuming.

I think for extra (?) money account, it would be good. I keep my core in Vanguard total stock market , Wellington and Wellsley.
If you haven't sold those individual stocks is it possibly too soon to start using the past tense?
sorry, i have both...sold some for realized gains, have not sold some for unrealized gains
So the gains were short term? Hopefully, you have accumulated losses to offset. Or that you are not in the 22% or higher tax bracket.

I have a friend who does her short term speculation only in an IRA. I see there are others in this thread who do the same.
So far all short term gain from one day to one month or two hold. All realized gains except one loss of $100.
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