Why does anyone buy individual shares?

capital0ne

Even Warren Buffett, say's most people should just buy a tracker fund - you'll never beat the market by buying individual share. And I think Benjamin Graham said the same.

So why does anyone buy shares when they can't possibly beat the market?

Anyone who says they know better is talking hogwash - they don't just look at Neil Woodford, he had a lucky run till now:

On 15 October 2019 the fund board announced that Woodford's flagship fund, Woodford Equity Income Fund, was to be shut down and Woodford had been removed as investment manager.[19] The following day Woodford announced he would resign from his remaining investment funds and close his investment company in an orderly fashion.

John_Smith_2019

I buy some individual shares, in order to skew my overall portfolio in a certain direction.
For example, I could buy a FTSE 100 tracker. But that contains banks and housebuilders, which I may feel are sensitive to a recession. So I can buy a few defensive stocks (pharma, utilities, tobacco etc) to add a defensive weighting to my overall exposure.

In the UK, the choice of available ETFs is diminishing (compared to the USA) due to regulations.

Also, some people don't like the way ETFs are structured.

Individual shares also give you the opportunity to add sector weightings at a time in the cycle when you feel they may be undervalued, relative to the whole market.

LobsterMemory

Surely buying trackers is the only way to guarantee you won't beat the market?

[Deleted User]

Buying a fund usually means buying individual shares chosen by someone else. At best, you'll be charged for the privilege; quite likely your financial adviser will also take a cut and, at worst, you won't even be able to buy and sell the fund when you wish.

Therefore the question is not "Why does anyone buy individual shares"? but
"Why does anyone not buy individual shares"?

AnotherJoe

capital0ne wrote: »

Even Warren Buffett, say's most people should just buy a tracker fund - you'll never beat the market by buying individual share. And I think Benjamin Graham said the same.

So why does anyone buy shares when they can't possibly beat the market?

Anyone who says they know better is talking hogwash - they don't just look at Neil Woodford, he had a lucky run till now:

On 15 October 2019 the fund board announced that Woodford's flagship fund, Woodford Equity Income Fund, was to be shut down and Woodford had been removed as investment manager.[19] The following day Woodford announced he would resign from his remaining investment funds and close his investment company in an orderly fashion.

Far too many definitive statements there which are provably wrong. And funnily enough your references to authority as to why you cannot, uses people who have beaten the market, LOL.

Lokolo

I buy shares in companies I feel are run well, and have the opportunity to outpace the rest of the index.

So why does anyone buy shares when they can't possibly beat the market?

Well yes, they can. As my shares have done in the past 6 months. So I am beating the market.

Obviously I cannot guarantee I will do forever, but I am currently.

benbay001

capital0ne wrote: »

they can't possibly beat the market?

Thanks for telling me.
I will let iweb know they have my figures wrong.
:beer:

Edit: Adding a bit more detail.
I bought XPP at four different points between Nov '18 and June, avg price £22.60. Returnd 27% inc dividends (now sold).

I bought SDY in August for 47p. Currently 28% up.

I bought TIFS at two points over the last 2 months, currently 8% up.

I bought IAG two weeks ago, currently 4% up.

30% overall this year.

EdGasketTheSecond

I've been buying individual shares since 1979. If you have enough money you can make your own portfolio and save the fund management fee. Plus you can buy and sell individual components of your own portfolio even though the overall market may not be moving much. It takes a lot of time and one has to be interested so not for everyone.

John_Smith_2019

I think the argument between buying a fund or individual stocks is sometimes misunderstood, because a lot depends on the circumstances and actions of the individual investor.

If you have a direct debit and pay the same amount in blindly every month, on a regular basis over many, many years - then yes, Bogle was right. Passive tracker every time.

But if you are paying in at irregular times and watching the market and have an interest in it, then you can time the market to some extent.

I know right now that UK equities are cheap relative to the US.
I know that oil and tobacco stocks are cheap on a CAPE basis and have a high dividend yield.

Now, I cannot tell if these sectors will continue to dwindle and die in the future. But I do know today and I do know the past.

TBC15

There are probably two types of amateur investor buying individual shares.

Those having a punt and those willing to put in the many.many.many.many hours of due diligence to make a go of it.

Being lazy I stick to funds.

John_Smith_2019

EdGasketTheSecond wrote: »

I've been buying individual shares since 1979. If you have enough money you can make your own portfolio and save the fund management fee. Plus you can buy and sell individual components of your own portfolio even though the overall market may not be moving much. It takes a lot of time and one has to be interested so not for everyone.

In your case, you will have saved a more significant amount in fund fees since 1979.
For someone closer to retirement age, the benefit of diversification probably outweighs the fund fees.