The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Re: Index fund investing versus stock selection Date:  10/8/2007  2:13 PM
Author:  2old4bs Number:  59498 of 90508

I think I have basically two options. Either invest in no-load index funds like the s & p 500, or try to beat the market by selecting individual stocks to hold for the long term.

Even 'basically' you have far more options than just the two you mentioned.

I agree with other posters that if you like to spend your time researching and following individual stocks, simply decide on a set percentage of your portfolio that you will do this with. I would determine that percentage by asking myself "What percentage of my portfolio am I willing to lose 70% of?" The preceding question is framed just this way based upon the tech decline in year 2000--if all your stock picks were in tech, you were down about 70%.

But as joelxwill pointed out, you don't marry a mutual fund (nor stock) position. If either is a dog, you can always get out.

I happen to rotate in and out of certain market sectors via mutual funds as they come into, and go out of, favor. I do that with a percentage of my portfolio, while the bulk of my portfolio is in index funds.

However, I believe that any investing style other than straight indexing requires an awful lot of time and attention. Only you can decide for yourself whether or not you're willing to do that. As KlangFool noted, if an individual stock isn't going to at least double, why bother with all the work? And for each one that doubles, you might have 2 or 4 that don't, so if you average the return overall, it might just not be worth the work.

If I were in your position right now, I would read "The Four Pillars of Investing" to help you determine an allocation for the major portion of your portfolio. After you've done that you can decide what portion of your port you're willing to 'play' with, and how.

Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us