Individual stocks vs ETFs

[Robandcindy2]

Really good article about high yield portfolios but really is an excellent message on the advantages of owning individual stocks vs ETFs.

http://seekingalpha.com/article/2541215-...-portfolio

Cheers

[cannew]

(10-05-2014, 06:34 PM)Robandcindy2 Wrote: Really good article about high yield portfolios but really is an excellent message on the advantages of owning individual stocks vs ETFs.

http://seekingalpha.com/article/2541215-...-portfolio
Cheers

Agree its a good comparison as far as fees go.

I think another problem with etf's is that you must take all 50 (and often more stocks) even though many might not be ones one would want to hold. If one believes in Dollar Cost Averaging, investing when stocks are reasonable and only in quality DG stocks, than stick to individual stocks.

[Joey Batz]

Does anybody recommend investing in an ETF or two as a hedge against their ability to pick dividend stocks?

[Dividend Watcher]

(10-08-2014, 10:56 AM)Joey Batz Wrote: Does anybody recommend investing in an ETF or two as a hedge against their ability to pick dividend stocks?

Not me. The years of management fees and limited visibility and control argue against it for me. Surely you could come up with a list of 30 companies that, if held for the long term such as the next 20 years, will do just fine. I could come up with a list of 10 without even thinking about it.

Now, if you just wanted to buy a couple ETF's and ignore your portfolio for the rest of your life, then maybe that's the way to go. Just because an ETF holds potentially hundreds of stocks doesn't mean you're buying safety nor a reliable dividend stream.

[Joey Batz]

(10-08-2014, 11:14 AM)Dividend Watcher Wrote:

(10-08-2014, 10:56 AM)Joey Batz Wrote: Does anybody recommend investing in an ETF or two as a hedge against their ability to pick dividend stocks?

Not me. The years of management fees and limited visibility and control argue against it for me. Surely you could come up with a list of 30 companies that, if held for the long term such as the next 20 years, will do just fine. I could come up with a list of 10 without even thinking about it.

Now, if you just wanted to buy a couple ETF's and ignore your portfolio for the rest of your life, then maybe that's the way to go. Just because an ETF holds potentially hundreds of stocks doesn't mean you're buying safety nor a reliable dividend stream.

Nah, you've pretty much got a point there. ETF's may be diversified, but I would say they're too diversified. As much as that sounds like blasphemy, there are so many stocks in every fund out there that I wouldn't buy individually. I have recommended ETF's and index funds to a friend of mine who knows absolutely nothing about investing, has no time to learn, and would rather put money in and just have it grow over the decades.

The closest thing to a mutual fund that I would consider putting my money into (even though it doesn't pay a dividend) is Berkshire Hathaway's B shares, mainly for exposure to businesses that you can't directly own through the stock exchange (Geico, Benjamin Moore, Dairy Queen, and Fruit of the Loom come to mind). And even there I'm debating if I'm wasting my time and money or not.

The ETF idea was just a hedge against, well, myself. I'm rapidly learning, but I'm still in the learning phase nonetheless.

[Dividend Watcher]

(10-08-2014, 04:59 PM)Joey Batz Wrote: The ETF idea was just a hedge against, well, myself. I'm rapidly learning, but I'm still in the learning phase nonetheless.

That is perfectly understandable. When you are faced with such a steep learning curve, and really it's not that bad, you tend to want something to give you a sense of security. Hell, I'm still learning.

Of this list, tell me which ones will be out of business or teetering on it in 20 years:

COP/CVX/XOM/JNJ/BDX/PG/CL/GIS/KO/PEP/GE/EMR/MMM/UTX/T/VZ ?

Maybe the oils will have to adapt but I bet so will the others.

That's why we often mention core companies in our portfolios. I think any of the above, if you buy with a P/E less than 20 (and for some that's a little high), will still be here 20+ years from now even if you don't read a single word about them in the interim. On top of that, you'll most likely have made money whether you reinvested the dividends or used them for other purchases. But that's me.

The other factor is your own temperment. If you need an ETF, bond fund or money market fund to enable you to sleep at night, then that's what you need to do. The worst thing is to be nervous and take an adverse action (like selling at the bottom) to mess up your plan. Had to edit this -- the worst thing you can do is listen to me, the former is probably the 2nd worse thing to do.

[Joey Batz]

(10-08-2014, 08:55 PM)Dividend Watcher Wrote:

(10-08-2014, 04:59 PM)Joey Batz Wrote: The ETF idea was just a hedge against, well, myself. I'm rapidly learning, but I'm still in the learning phase nonetheless.

That is perfectly understandable. When you are faced with such a steep learning curve, and really it's not that bad, you tend to want something to give you a sense of security. Hell, I'm still learning.

Of this list, tell me which ones will be out of business or teetering on it in 20 years:

COP/CVX/XOM/JNJ/BDX/PG/CL/GIS/KO/PEP/GE/EMR/MMM/UTX/T/VZ ?

Maybe the oils will have to adapt but I bet so will the others.

That's why we often mention core companies in our portfolios. I think any of the above, if you buy with a P/E less than 20 (and for some that's a little high), will still be here 20+ years from now even if you don't read a single word about them in the interim. On top of that, you'll most likely have made money whether you reinvested the dividends or used them for other purchases. But that's me.

The other factor is your own temperment. If you need an ETF, bond fund or money market fund to enable you to sleep at night, then that's what you need to do. The worst thing is to be nervous and take an adverse action (like selling at the bottom) to mess up your plan. Had to edit this -- the worst thing you can do is listen to me, the former is probably the 2nd worse thing to do.

Haha, no your advice is good. Honestly, I'm not putting any of my money into funds, for the reasons of 1) The S&P 500 is so high right now; and 2) I'm nowhere near as good at analyzing funds as I am with individual stocks (which I'm no master at either, but still learning and learning quickly). There are other reasons, of course, but those are the main two.

I'd still recommend ETF's for a friend of mine who wants to invest and just doesn't have the time for me to sit down with him and teach him how to invest, provided he's not OK with me handing him a list of stocks and telling him to invest in those. They're probably the best thing for the "know-nothing investor" as Warren Buffett put it.

[davidsmith]

There are so many people out there trying to obtain wealth by making an investment in individual stocks. The fact is that no one really has any business purchasing individual stocks. This mainly has to do with the fact that individual stocks have a tendency just gain pennies.

ETFs are a varied container of stocks that miminizes the consequences of unexpected losses from any individual stock or bonds in a portfolio. ETFs are just like stock indexes and not definitely handled. ETFs are always handled by a professional manager who will always have faster access information as in comparison to you.

Mergers and Acquisitions [LINK REMOVED]

[Jimbo]

(11-17-2014, 06:33 AM)davidsmith Wrote: There are so many people out there trying to obtain wealth by making an investment in individual stocks. The fact is that no one really has any business purchasing individual stocks. This mainly has to do with the fact that individual stocks have a tendency just gain pennies.

ETFs are a varied container of stocks that miminizes the consequences of unexpected losses from any individual stock or bonds in a portfolio. ETFs are just like stock indexes and not definitely handled. ETFs are always handled by a professional manager who will always have faster access information as in comparison to you.

Seriously??

[Dividend Watcher]

Jimbo, well disguised SPAM if you ask me. If you follow the link, I'm guessing they're gonna sell you something. Same old FFA (Future Fertilizer of America) to me. But that's OK, I'm looking forward to spending my "pennies" in a few years.

[daat99]

Sounds like spam to me to, no way I'm following that link...

[Dividend Watcher]

(11-18-2014, 08:08 AM)daat99 Wrote: Sounds like spam to me to, no way I'm following that link...

I did. It's just a wealth management firm that promises to make you wealthier than Warren Buffet if you'd only give them your money to manage.