I buy inexpensive ETFs (under .07%) Whether It would be less expensive to buy individual stocks, I have to admit, I haven't looked into, but honestly, even if it is, I don't want to work that hard! I get a LOT of diversification buying mostly ETFs and if I tried to match that diversification by buying the individual stocks directly I'd be driving myself nuts trying to keep everything straight. And wouldn't I have a trading fee for each and every stock I had to buy individually in order to match the diversity of my current ETFs? (probably hundreds of different stocks)? That sounds like it would be more expensive. Not less expensive. I may be confused, but either way, I still don't want to work that hard. :) ...However, I can imagine other scenarios for other people in which it might make more sense.
For me you have more control over dividends when you own individual stocks. When you own an ETF or mutual fund you have no control of what is in your portfolio when it comes to stocks.
What is the ceiling or cutoff of what you consider to be "little money"? I know that many call it "it depends ". Perhaps you would help with more specificity. Thank you.
Justin, It is important to clearly understand the risk you are trying to diversify. The risk that an individual suffers a dramatic loss specific to the company itself, not the general market influence. So, when you own one stock and add another, you have reduced your risk by 50%, when you add another stock you reduce your risk by 33%, so as you add stocks the benefit of adding the next stock becomes less and less. At some point the benefit is not meaningful ; this point is generally accepted as 20 stock or more. Consider the smallest practical amount that you could invest per stock, say $2,000. Then if you want 20 stocks, you need $40,000. Consider another way to look at the problem (Not academically approved): Say you have $40,000 to invest and you are willing to risk $5,000 on and individual stock. Then buy 8 stocks ($40,000 / $5,000). At 8 stocks your risk has reduced to 12.5% per stock (100%/8). If you have 20 stocks it would be 5% per stock (100%/20) Consider this food for thought, nothing prescriptive. I hope it helps you.
Index mutual funds have fairly low fees. Managed funds ...not so much. Costs create drag and kill the power of compounding. Find a good spot...with diversification and low costs and steady investment in. GL. *And follow Ken.
i argue the opposite. If you have lots of money, you want to protect it or delegate it. If you have no money, you want individual stocks to try to make something as you got nothing to lose.
@@Cor430vette In defense of Alex I think Ken would actually agree with him. I've read Ken's books (Debunkery and Markets Never Forget, but People Do). He say's that mutual funds are fine especially for smaller investors, however he summarizes that an individual investor with small amounts of capital can still concentrate quality growth stocks especially when they are young so that the grown will allow them to quickly build up capital to diversify into 20-30 stocks in a portfolio. I think Ken is essentially optimistic that small amounts of capital against the backdrop of time are more beneficial to break into the capital threshold that will allow you to pay for managed portfolio of stocks.
Mutual funds can be actively managed and have a high turnover rate which means you are subject to capital gains taxes. Depending on your tax bracket this can be expensive.
Buffalo Bob: New big player now: Amzn is rumored to be considering using cryptocurrencies for their customer's purchases. Two major "weaknesses" Mr. Fisher uses on these new "currencies' and with Bite coins is there is no value on the coin, like a $10 dollar Bill. And the other argument is the issue of daily if not but also sever volatility of the value. I might assume if AMZN solves the value issue, it will solve the volatility issue also.
Ken reminds me of my dad’s best friend who would always give sound advice and easy to listen to
I buy inexpensive ETFs (under .07%) Whether It would be less expensive to buy individual stocks, I have to admit, I haven't looked into, but honestly, even if it is, I don't want to work that hard! I get a LOT of diversification buying mostly ETFs and if I tried to match that diversification by buying the individual stocks directly I'd be driving myself nuts trying to keep everything straight. And wouldn't I have a trading fee for each and every stock I had to buy individually in order to match the diversity of my current ETFs? (probably hundreds of different stocks)? That sounds like it would be more expensive. Not less expensive.
I may be confused, but either way, I still don't want to work that hard. :) ...However, I can imagine other scenarios for other people in which it might make more sense.
What trading fees? Most brokers have zero commission fees nowadays.
Thank you very much Ken: always a blessing: God bless you.
Hello sir,
It'd be great if you can explain the implications of diversifications vs concentration.
Thanks
Ken, that bruise under your left index finger in this video certainly looks like it came with a few choice words!
Great basic explanation! Thank you!
For me you have more control over dividends when you own individual stocks. When you own an ETF or mutual fund you have no control of what is in your portfolio when it comes to stocks.
Thank you for your dedication and wisdom.
Always looking good.
What amount of money is considered enough to justify owning individual stocks?
What is the ceiling or cutoff of what you consider to be "little money"? I know that many call it "it depends ". Perhaps you would help with more specificity. Thank you.
Justin, It is important to clearly understand the risk you are trying to diversify. The risk that an individual suffers a dramatic loss specific to the company itself, not the general market influence. So, when you own one stock and add another, you have reduced your risk by 50%, when you add another stock you reduce your risk by 33%, so as you add stocks the benefit of adding the next stock becomes less and less. At some point the benefit is not meaningful ; this point is generally accepted as 20 stock or more.
Consider the smallest practical amount that you could invest per stock, say $2,000. Then if you want 20 stocks, you need $40,000.
Consider another way to look at the problem (Not academically approved): Say you have $40,000 to invest and you are willing to risk $5,000 on and individual stock. Then buy 8 stocks ($40,000 / $5,000). At 8 stocks your risk has reduced to 12.5% per stock (100%/8). If you have 20 stocks it would be 5% per stock (100%/20) Consider this food for thought, nothing prescriptive. I hope it helps you.
Index mutual funds have fairly low fees. Managed funds ...not so much. Costs create drag and kill the power of compounding. Find a good spot...with diversification and low costs and steady investment in. GL. *And follow Ken.
Costs are not as important as investor behavior , panic and selling into corrections costs people way more then fees…
Thank you Fisher So helpful
Thank you for your insights
Love these videos.
This is just an active manager promoting active investing.
i argue the opposite. If you have lots of money, you want to protect it or delegate it. If you have no money, you want individual stocks to try to make something as you got nothing to lose.
Have you written 11 books with 4 best sellers ? Like him? Managed money for over 40 years ?no ? Stop arguing then .,,
@@Cor430vette In defense of Alex I think Ken would actually agree with him. I've read Ken's books (Debunkery and Markets Never Forget, but People Do). He say's that mutual funds are fine especially for smaller investors, however he summarizes that an individual investor with small amounts of capital can still concentrate quality growth stocks especially when they are young so that the grown will allow them to quickly build up capital to diversify into 20-30 stocks in a portfolio. I think Ken is essentially optimistic that small amounts of capital against the backdrop of time are more beneficial to break into the capital threshold that will allow you to pay for managed portfolio of stocks.
Why are stocks taxe efficient and not mutual funds ?
Mutual funds can be actively managed and have a high turnover rate which means you are subject to capital gains taxes. Depending on your tax bracket this can be expensive.
All-World index is probably the best long term bet.
Interesting
Buffalo Bob: New big player now:
Amzn is rumored to be considering using cryptocurrencies for their customer's purchases.
Two major "weaknesses" Mr. Fisher uses on these new "currencies' and with Bite coins is there is no value on the coin, like a $10 dollar Bill.
And the other argument is the issue of daily if not but also sever volatility of the value.
I might assume if AMZN solves the value issue, it will solve the volatility issue also.
Guy is not talking perormance though. 99% of hedge funds didn't outperform nasdaq and s&p throughout the last years