secondopinion wrote: ↑Tue Jan 24, 2023 3:27 pm
nedsaid wrote: ↑Tue Jan 24, 2023 2:44 pm
secondopinion wrote: ↑Tue Jan 24, 2023 1:12 pm
nedsaid wrote: ↑Tue Jan 24, 2023 9:24 am
Amazing. I would not have thought that Bogleheads would have such an article in its Wiki. There has been a lot of discussion here about tax loss harvesting with individual stocks. Folks will attempt to more or less replicate an index with individual stocks, Bogle talked about this. What is described in the article is very similar to what I have done myself except that most of my stocks are within an IRA so I am unconcerned about tax loss harvesting.
I would actually try to beat the indexes a bit, one reason my stocks tend to have a Value orientation. I realized after a while what I was really doing was sampling. Last I checked, my 15 year performance was about the same as the Vanguard Value Index. It is actually not a bad accomplishment.
The Wiki article is sort of a vindication, it echoes things I have said here many times. I guess I really do know a thing or two.
I think the standard investor should not do this (the page does say "This article is intended for experienced investors."). However, I am pretty sure that many market veterans can make a reasonable portfolio. I have always said that active investing is "not about beating the market but meeting goals". Some can do it by buying passive funds, some use active funds, some do it themselves with direct selection.
There is a lot to gain and learn from the market from doing stuff yourself. But most people do not have the ability to handle it properly.
I have told people to invest with the broad indexes. If they want to try some some of active management use the factor funds at DFA or Avantis. The low cost active funds at Vanguard would also be acceptable. I don't tell average investors to pick stocks. What I will do, if they have that itch to do individual stocks, is how to do it in a way that minimizes their risk.
That is correct.
The entire point of investing is to have the highest likelihood of meeting goals while reducing risks that cannot be afforded (including risks to our own human capital). Speculation is about taking risks for profit; the affordance of speculation is debatable. However, like treasury bonds/TIPS are not enough returns for some investors to actually meet goals, many must take some speculative risks. Total stock funds are generally enough, but it is not always ideal for every investor. Most investors, maybe it is better.
I have learned over the years that my objectives are more important than the market's returns; I stopped tracking the market because it is pointless to this reality. Beat or lose to the market, I have had both. As long as my objectives are the forefront rather than the market, I do just fine.
Yes, an investor might choose to veer from a Total Stock Market Index to meet his or her objectives. For example, an older investor might choose to invest in higher dividend and lower volatility stocks for the dual purpose of income and lower portfolio in the portfolio. This investor wants to still participate in the Stock Market but with less volatility.
For me, individual stocks is mostly how I started equity investing though I had mutual fund investments before. When I started with the individual stocks in 1989, my equity investing really got rolling. So what I did was a dual track. By the year 2000, my equity investments were about 50% in individual stocks and 50% in stock mutual funds. After the 2000-2002 bear market, I made the conscious decision to emphasize mutual funds, particularly index funds, over individual stocks.
62% of the portfolio is in equities, almost 21% of my equities or 13% of my portfolio are in individual stocks. Why am I doing that? First, it is fun to own stocks individually. Second, it has been a terrific learning experience. It gives me insight to what portfolio managers face, or as the Wiki puts it, I see how sausages are made. Third, I haven't hurt myself doing this as the stocks have performed as one would expect. Fourth, I see this as a source of a growing income stream through the dividends. As I get closer to retirement, I value that income stream more and more. Fifth, I see this as a mostly passive investment, in keeping with the Boglehead philosophies.
A fool and his money are good for business.