To make the deal even sweeter, they even carry lesser of a
risk than individual stocks, though that ends up reducing the return rate as well.
As a reminder: i) Asset allocation plays a far greater role in returns than perhaps we like to think — in this series I thought I'd try illuminate some of the logic behind my own portfolio allocation & stock selection, rather
than individual stock picks, and ii) this portfolio allocation pie - chart might prove handy:
The comparison in Exhibit 4 demonstrates that not only do individual stock strategies tend to be volatile, but over the long term, a consistent approach (such as the S&P BSE SENSEX) can provide consistent returns that, in some cases can be better
than individual stock performance.
I'd be happy to pay those costs if I thought my index funds were providing a better investment vehicle, but in fact, I think they are providing a worse investment
vehicle than individual stocks.
Not only does holding an ETF protect you from individual stock gyrations, but chances are you're like to incur lower trading costs as well since ETF and mutual fund investors tend to hold their positions much
longer than individual stock traders.
Because of their diversity, more mutual funds are considered a safer
bet than individual stocks, as they are spread out in such a way that poor performance in one area of the market will not necessarily make that much of an impact on the overall fund.
Mutual funds in general have lower
returns than individual stocks but because they are diversified among many different stocks they also tend to lose less in market downturns.
Online Saving Accounts provide some reasonable returns (~ 5 % APY) but is there anything with better returns that is
safer than individual stocks or mutual funds?
For the most part, though, these options are more volatile
than individual stocks — especially if you invest in major integrated companies — because most major oil producers these days are diversifying themselves and enjoy different revenue streams.
Investing in mutual funds, rather
than individual stocks, can be a way of mitigating some of the risks described below.
that track an index, rather
than individual stocks or sectors, is a simple and low - cost way to achieve this.)
(Tip: Investing in exchange - traded funds (ETFs) that track an index, rather
than individual stocks or sectors, is a simple and low - cost way to achieve this.)
Notice that we compared an industry sector ETF (real estate) to the S&P 500, rather
than an individual stock.
One of my favorite ways to diversify my portfolio is by investing around a larger theme rather
than an individual stock.
It can be considered a huge simplification of the dividend discount model, applied to the market as a whole, rather
than an individual stock.
Before we get going, let's review the strategy of seeking dividends through ETFs rather
than individual stocks or mutual funds.
This parallels your suggestion, and while you may need less focus on Index funds
than individual stocks, letting your portfolio become unmanageable no matter the vehicle is unwise.
These will generally be accessed via managers and funds, rather
than individual stocks.
I consider not having to go thru (and pay) a broker one of the many advantages of working with funds rather
than individual stocks, and it does offer a possible advantage to keeping all your funds in the same «family» so you can move value directly between them.
While I think it's great for a novice investor to read as much as they can, including following what other smart people do, I'm a firm believer that you should study the reasons, criteria and mistakes they make rather
than the individual stocks they invest in.
The reversion to the mean seems to work much better the more diversified the basket is and so that is why I have been more focuses on Index and sector etf's rather
than individual stocks.