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Frequent Contributor

Re: Why do investors chose to hold individual stocks in their portfolio?

The OP was purposely addressed to those who hold stocks in their portfolio, Bentley, so counter-debates could be avoided.

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Re: Why do investors chose to hold individual stocks in their portfolio?

Almost all of the individual stocks that I own in my brokerage account are ones that I inherited. Some had a very high gain over the original price. I pared down the number of stocks by about half.

I have purchased a couple of individual speculative stocks, one of which is for a start up hi-tech company.

Otherwise, about 90% of what I own in my brokerage and retirement accounts are mutual funds.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@Juris2 wrote:

Almost all of the individual stocks that I own in my brokerage account are ones that I inherited. Some had a very high gain over the original price. I pared down the number of stocks by about half.

I have purchased a couple of individual speculative stocks, one of which is for a start up hi-tech company.

Otherwise, about 90% of what I own in my brokerage and retirement accounts are mutual funds.


I held company shares from my retirement days, but have always had room in my portfolio for undervalued investments, be it a stock or a CEF. I hold a higher percentage of individuals stocks than usual at present since I found opportunity when the markets were hit. My wife and I added to PIMIX and MOAT recently.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@outandabout wrote:

The OP was purposely addressed to those who hold stocks in their portfolio, Bentley, so counter-debates could be avoided.


 

 Why continue to just make stuff up? You did not address your question to anyone. This is the question you posed.

 

"Why do investors chose to hold individual stocks in their portfolio?"

 

 

The snippet from the Journal of Finance I posted exposes the hazards of choosing to hold common stock directly.

If you disagree, or if you can provide facts that would render that information invalid, this would be a good time to produce that data.

 

Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors

Journal of Finance, Vol. 55, Issue 2

Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading.

 

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Re: Why do investors chose to hold individual stocks in their portfolio?


@Bentley wrote:

@outandabout wrote:

The OP was purposely addressed to those who hold stocks in their portfolio, Bentley, so counter-debates could be avoided.


 

 Why continue to just make stuff up? You did not address your question to anyone. This is the question you posed.

 

"Why do investors chose to hold individual stocks in their portfolio?"

 

 

The snippet from the Journal of Finance I posted exposes the hazards of choosing to hold common stock directly.

If you disagree, or if you can provide facts that would render that information invalid, this would be a good time to produce that data.

 

Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors

Journal of Finance, Vol. 55, Issue 2

Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading.

 


Why be an antagonist, Bentley?  You understand the intent of the OP.

Peace.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@outandabout wrote:

@Bentley wrote:

@outandabout wrote:

The OP was purposely addressed to those who hold stocks in their portfolio, Bentley, so counter-debates could be avoided.


 

 Why continue to just make stuff up? You did not address your question to anyone. This is the question you posed.

 

"Why do investors chose to hold individual stocks in their portfolio?"

 

 

The snippet from the Journal of Finance I posted exposes the hazards of choosing to hold common stock directly.

If you disagree, or if you can provide facts that would render that information invalid, this would be a good time to produce that data.

 

Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors

Journal of Finance, Vol. 55, Issue 2

Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading.

 


  You understand the intent of the OP.

Peace.


 

 Your question, "Why do investors chose ( choose ) to hold individual stocks in their portfolio?" leaves the door open to many answers; if you wanted answers that only conform to your preconceived opinions, you might want to tighten up your open-ended questions. It is hard to read another's mind.

 Additional explanations as to why investors choose to hold individual stocks may include the fact that they feel they can pick winners in advance, forecast future market movements, hit home runs, or are addicted to risk-taking. The snippet from the Journal of Finance provides a well researched and reviewed opinion relating to the question you posed in the OP. If you disagree with their research, please present some supporting data to buttress your opinion.

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Re: Why do investors chose to hold individual stocks in their portfolio?

A debate wasn't my intent with this thread, Bentley, so you can present your views to anyone interested. I doubt you will continue unless other M* members wish to play your little games. I can't imagine what benefit you receive in knowingly injecting you views when you well know this OP was directed at individuals who hold or investing stocks.

I thought the OP was a good idea for those invested in stocks to relate their experiences.

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Re: Why do investors chose to hold individual stocks in their portfolio?

@Bentley  you posted a quote from an article - "Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading."

The first part of the quote started to appear on topic but the second part has no bearing to the thread IMO. I didn't read any replies on this subject from members that mentioned "active trading". I dare say that most mutual funds and even index funds that "re-balance" trade a lot more than I do with my individual stocks. 

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Explorer ○○○

Re: Why do investors chose to hold individual stocks in their portfolio?

Very prescient question in terms of where we were 10 weeks ago.   So if everybody owns the same indexes of 30, 500 ,2000, 3000 stock names, and the market takes a hit from a heretofore unimagined exigent shock, the RETAIL investors indeed do go to a herd mentality and when they sell because they only thought they were "in it for the long term" they all start selling all of the same stocks.  

Besides indexes we have the rapidly vanishing O/E mutual funds.  The most successful of which over the last few years have mostly been FOCUUS" funds where the managers are paid to manage a portfolio of generally LESS THAN 50 stocks.  The rest end up with up to 350 stocks in the fund for diversification which means you are going to own those 30 to 50 great themes and ideas and +80% of the rest is just the chaff which historically has not performed well enough to boost  the total returns.  

How did the preferred shares of the Mortgage REITs perform vs the preferred shares of the TBTF Major Wall Street bank preferreds?  Ditto TECH vs machinery themes?  There are those that before the buy the dip mentality asserted routinely sold at least a something here and there as others became greedy so as to have some cash on hand when others became fearful.  This does not imply that you have to sell everything in a position but likely some and continuing to sell many of your Highest cost basis shares of a position.  MSFT pays a 1.1% dividend but the shares are trading 70% higher than they were in 2018's fourth qtr decline.  Those shares now pay 1.9% against that cost basis.  So where do you put money now to get better than 1.9% with the same or lesser risk than that dividend has.  We can often do better by just looking into a sector fund holdings and cherry picking from the top ten holdings.  

RETAIL investors it seems will always be a finicky bunch.  In the fourth qtr of 2018 Bond FUNDS  got slaughtered.  The banks, insurers and pension funds owned bonds not bond funds. So one group sold because they really thought their money was safe in bonds which it would have been if they were not so exposed to retail investor sentiment.  So Retail investors ARE mostly a lazy bunch and do not have or take the time to closely monitor their portfolios.  Almost all of that ilk are seeking the set it and forget it pathway.  That may not be the pathway to maximizing their total returns but it is still way better to do than for those who do nothing, and do not save or invest at all, when they could have done 1% to 401-K or even less into a Roth.  

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Re: Why do investors chose to hold individual stocks in their portfolio?


@MNfish wrote:

@Bentley  you posted a quote from an article - "Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading."

The first part of the quote started to appear on topic but the second part has no bearing to the thread IMO. I didn't read any replies on this subject from members that mentioned "active trading". I dare say that most mutual funds and even index funds that "re-balance" trade a lot more than I do with my individual stocks. 


Brantleys/bentleys practice is to post an article with little connection to the OP regardless of how irrelevant it is,  e.g., a 20 year old article behind a paywall which discusses the underperformance of individual investors who are active traders where the discussion is about Holding individual stocks, just to get a reaction from other posters.

He adds no value to any discussion which is why I don’t respond to his posts.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@Intruder wrote:

@MNfish wrote:

@Bentley  you posted a quote from an article - "Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading."

The first part of the quote started to appear on topic but the second part has no bearing to the thread IMO. I didn't read any replies on this subject from members that mentioned "active trading". I dare say that most mutual funds and even index funds that "re-balance" trade a lot more than I do with my individual stocks. 


Brantleys/bentleys practice is to post an article with little connection to the OP regardless of how irrelevant it is,  e.g., a 20 year old article behind a paywall which discusses the underperformance of individual investors who are active traders where the discussion is about Holding individual stocks, just to get a reaction from other posters.

He adds no value to any discussion which is why I don’t respond to his posts.


+1. You hit the nail on the head, Intruder. I agree that not responding is the best solution, as he dines on debate.

Edit: Bentley can always start his own thread if he is so inclined to profess his views if he felt strongly about his positions rather than continuing to disrupt a thread where he doesn't have investment interest.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@outandabout wrote:

The OP was purposely addressed to those who hold stocks in their portfolio, Bentley, so counter-debates could be avoided.


 

 

Tim, Tar42, Outandabout,

 Your claim that the OP "purposely addressed to those who hold stocks in their portfolio" is a complete fabrication. It was not addressed to those who hold stocks as you claim. To be fair I went back and read other replies and found that I was not the first fund holder to respond, nor was I the second fund holder to reply, nor was I the third to reply to your question; "Why do investors chose ( choose ) to hold individual stocks in their portfolio? " You continue to twist, makeup, and flat out lie and wonder why we question your claims of massive profits day trading a stock that went up 132% in a day, among other postdated trade claims?

Mortmain
05-01-2020 12:24 PM
Re: Why do investors chose to hold individual stocks in their portfolio?
That's a great question. The answer is probably because they are being encouraged to do so by the industry, with slogans like "5 cheap stocks to buy now". Unless you are Warren Buffet, picking winners is spinning the roulette wheel.


51hh
05-01-2020 12:39 PM
Re: Why do investors chose to hold individual stocks in their portfolio?


Most investors I know of are either fully in mutual funds or own a hybrid of mutual funds and stocks.  For the latter, usually a small portion (say 10% of the total portfolio) is in stocks.  
Main reasons: (1) takes much more time/expertise (and interest) to research/know any stocks, (2) the gyration (ups and downs) is much higher than typical (say index) mutual funds, (3) one seems to be the only novice in a gambling table - guess who is gonna lose, (4) painful experience from either family or self, and (5) a diversified portfolio of mutual funds does the job generally well.
One can select a few stocks for fun/thrill on the side


galeno
05-03-2020 08:01 AM
Re: Why do investors chose to hold individual stocks in their portfolio?

The two main reasons I would hold individual stocks.
1. Attempt to beat an equity market index (VTI or VT)
2. Make investing more personal and exciting


Trudy,

 Do you dispute the claim and conclusions of the referenced article, peer-reviewed, and published in the Journal of Finance? The Barber/Odean research is widely disseminated and readily available to read; if you can produce any credible investigation that disputes its finding, please present it. BTW, the reason you don't respond to me is because of our previous discussions in which you always ended up embarrassed. Remember when you claimed I could not spell cat if you spotted me the c and the t? That was in response to my warning you about your May 2015 purchase of KMI at a near all-time high of $42 and your plans to buy more.a

Abstract
Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading. Of 66,465 households with accounts at a large discount broker during 1991 to 1996, those that traded most earned an annual return of 11.4 percent, while the market returned 17.9 percent. The average household earned an annual return of 16.4 percent, tilted its common stock investment toward high-beta, small, value stocks, and turned over 75 percent of its portfolio annually. Overconfidence can explain high trading levels and the resulting poor performance of individual investors. Our central message is that trading is hazardous to your wealth.

https://faculty.haas.berkeley.edu/odean/Papers%20current%20versions/Individual_Investor_Performance_...

 The reference above is not behind a paywall, very robust, and has as much validity today as when the research was conducted. The text was posted with a single comment to the OP; that he posed an excellent question with no intention of debating.
Your beef appears to be with the Brad Barber Ph.D. And Terrance Odean Ph.D.

Brad M. Barber
Professor, University of California, Davis
Professor Brad Barber is an internationally recognized authority on investor psychology, stock analyst recommendations, online trading, and mutual fund performance. His research includes the effect of expenses on money flowing into mutual funds, gender-related overconfidence in stock trading, the impact of coordinated trading by individual investors, and how active equity trading is hazardous to individual investor wealth.
Barber is one of the top 50 finance scholars in the world ranked by total citations. He has published groundbreaking research in leading academic journals, including the Journal of Finance, the Journal of Financial Economics, Review of Financial Studies, the Journal of Political Economy, Quarterly Journal of Economics, American Sociological Review, the Journal of Financial and Quantitative Analysis, and the Financial Analyst Journal.
Barber received a Ph.D. in finance and an MBA from the University of Chicago,

 I find his findings valid and verifiable by anyone who has posted here over the past two decades.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@outandabout wrote:

@Intruder wrote:

He adds no value to any discussion which is why I don’t respond to his posts.


+1. You hit the nail on the head, Intruder. I agree that not responding is the best solution, as he dines on debate.

Edit: Bentley can always start his own thread if he is so inclined to profess his views if he felt strongly about his positions rather than continuing to disrupt a thread where he doesn't have investment interest.


Another thread taken off topic and trashed by ill-intentioned trolling.  Anyone with an ounce of common sense can understand the utility of the IGNORE function on the legacy forum.

 

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Re: Why do investors chose to hold individual stocks in their portfolio?

Brantley 

You insist on ignoring the response of my prior post that I have no interest in responding to your post that was outside the scope of the initial post of the OP, which did not ask posters to analyze whether individual investors pay a performance penalty for active trading of common stocks. That’s your Shtick.

I will accept that your linguistic skills Have improved to the point that you can spell cat without being spotted the C and the A.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@MNfish wrote:

@Bentley  you posted a quote from an article - "Individual investors who hold common stocks directly pay a tremendous performance penalty for active trading."

The first part of the quote started to appear on topic but the second part has no bearing to the thread IMO. I didn't read any replies on this subject from members that mentioned "active trading". I dare say that most mutual funds and even index funds that "re-balance" trade a lot more than I do with my individual stocks. 


 

  It is challenging to have such an extensive piece limited in scope. Take what the research offers and ignore the rest if you wish. Few if any topics stay strickly on the OP. Seems as the only time a complaint is raised is when opinions differ. There is tremendous value and information provided in the referenced academic article published in the Journal of Finance, if you read it, you'll find it not as critical as your reply implies.

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Re: Why do investors chose to hold individual stocks in their portfolio?


@Bentley wrote:

@outandabout wrote:

The OP was purposely addressed to those who hold stocks in their portfolio, Bentley, so counter-debates could be avoided.


 

 

Tim, Tar42, Outandabout,

 Your claim that the OP "purposely addressed to those who hold stocks in their portfolio" is a complete fabrication. It was not addressed to those who hold stocks as you claim.

  "Why do investors chose to hold individual stocks in their portfolio?" refers to those holding stocks. That should be evident to most. I suppose I could have said individual stocks, but I think most understood based on the responses.

 

You continue to twist, makeup, and flat out lie and wonder why we question your claims of massive profits day trading a stock that went up 132% in a day, among other postdated trade claims?

Now your into name calling, Bentley. Shame on you! 

I believe I said I traded SRNE for a nice profit.

I also stated I bought a $7 and sold for $8.

My portfolio return over the past two decades has been very modest, hardly reason to lie as you suggest, Bentley.

Not wasting any more time with you!

 

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Re: Why do investors chose to hold individual stocks in their portfolio?


@outandabout wrote:

@Bentley wrote:

@outandabout wrote:

The OP was purposely addressed to those who hold stocks in their portfolio, Bentley, so counter-debates could be avoided.


 

 

Tim, Tar42, Outandabout,

 Your claim that the OP "purposely addressed to those who hold stocks in their portfolio" is a complete fabrication. It was not addressed to those who hold stocks as you claim.

  "Why do investors chose to hold individual stocks in their portfolio?" refers to those holding stocks. That should be evident to most. I suppose I could have said individual stocks, but I think most understood based on the responses.

 

 

Your question, as stated does not limit replies to only those that hold individual stocks, I don't know how much clearer we can be. I and the other fund investors who replied to your question have done so in a well-intentioned and polite manner.

Your claim that the OP "purposely addressed to those who hold stocks in their portfolio" is a complete fabrication. It was not addressed to those who hold stocks as you claim.

 Maybe this will help; Suppose the question was, why do people drive sports cars? That is also an open-ended question which non-sports car owners have opinions on and would be free to express.

I think you need a hobby other than stalking me. Please put me on ignore.

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