Why does anyone buy individual shares?

Matthew2018

Surely tracker funds are set up to to go up and down in line with the shares or funds they are tracking. They are not designed to do better than than the underlying assets. They can hardly beat the market. They are a safe option that won't lose much.



To beat the market you'd have to do something different, but that's risky. You might win a lot but you might just as easily lose a lot

arwain

poppy10 wrote: »

Someone who invested 10k in an S&P 500 index tracker in 1989, and did nothing else other than reinvesting the dividends, would have over £1.5million now.

As I have mentioned previously in this thread I think it is possible to get rich by regular investment over the long term in tracker funds, and there is at least one poster (probably more) on this site that has done it.

The above quote (or something similar) is something I have read several times in investment book or from on line sites. Although the quote is correct, I doubt there are very few people who actually did this. Not because they did not think the S&P would not increase over time but because very few people could have afforded to invest 10k at that time. Taking inflation into account that 10k would be more like finding 25k to invest in 1989 in todays money.

ColdIron

Matthew2018 wrote: »

Surely tracker funds are set up to to go up and down in line with the shares or funds they are tracking. They are not designed to do better than than the underlying assets. They can hardly beat the market. They are a safe option that won't lose much.

Trackers are not a safe option and will lose as much as the underlying holdings, think 2008/09 GFC

abz88

Eco_Miser wrote: »

I know. I don't. I don't see anything in my post that suggests that I do.

I was answering the original question "Why does anyone buy individual shares?" That anyone does include the occasional billionaire.

It might also include the various letters in castle96's thread.

Yes, billionaire investors will get control and have voting clout but that's not quite the same as controlling the company. They are also few and far between with most investing through an investment company (whether their own company or a fund) to reduce their own personnel exposure.

ColdIron wrote: »

Trackers are not a safe option and will lose as much as the underlying holdings, think 2008/09 GFC

Technically yes as no investment is "safe" but in general they are safer than buying individual shares. If you own shares in 10 companies there is a much higher chance that those 10 companies will go bust than every single company on the S&P 500 which is what you would need to happen to lose everything in a tracker mirroring the S&P 500.

abz88

iglad wrote: »

All very well saying that but I've not read of anyone who's actually made a million investing in tracker funds with a small investment.

What do you consider a small investment and how many people have you read of that have become millionaires with small investments in single companies? By way of example, the initial offering for Apple was $22. If you took a punt on it at that price you would have had to have invested about $84,000 for it to be worth $1 million at its current share price, which isn't exactly a small investment! (yes, there would be dividends etc. but you still wouldn't make a $1m with a small investment)

arwain

abz88 wrote: »

By way of example, the initial offering for Apple was $22. If you took a punt on it at that price you would have had to have invested about $84,000 for it to be worth $1 million at its current share price, which isn't exactly a small investment! (yes, there would be dividends etc. but you still wouldn't make a $1m with a small investment

I think you are forgetting about the various share splits that have taken place over the years these make a huge difference to ones return.

If you had invested around $2000 at the IPO then you would have around $1000,000 in Apple stock today.

This would have been a far better investment than an S&P tracker but who knew at the time of the IPO that Apple would turn out to become what it has.

I remember many years ago (must be close to 30), I used to dabble with doing a bit of day trading on the US stock market (unsuccessfully I might add).

I had been watching the Apple share price during the day, I had not traded it but it seemed to be more volatile than usual. That night after the US market closed (9pm UK time). Apple released a profit warning. The share price went down by 50% in after market trading. From memory I think it closed at $30 and opened around $15 the next day.

I did consider buying some at the time as a long term buy and hold, but I was glad (at the time) that I didn't because the share price kept going down. Can't remember what it went down to, but I think it might have been $11 or $12.

Now this was long before the IPhone and the Ipad had been invented, but I do wonder how many of these people who had bought at $22 in the IPO, got out when the share price fell to that level, quite a few I would imagine.

abz88

arwain wrote: »

I think you are forgetting about the various share splits that have taken place over the years these make a huge difference to ones return.

If you had invested around $2000 at the IPO then you would have around $1000,000 in Apple stock today.

This would have been a far better investment than an S&P tracker but who knew at the time of the IPO that Apple would turn out to become what it has.

I remember many years ago (must be close to 30), I used to dabble with doing a bit of day trading on the US stock market (unsuccessfully I might add).

I had been watching the Apple share price during the day, I had not traded it but it seemed to be more volatile than usual. That night after the US market closed (9pm UK time). Apple released a profit warning. The share price went down by 50% in after market trading. From memory I think it closed at $30 and opened around $15 the next day.

I did consider buying some at the time as a long term buy and hold, but I was glad (at the time) that I didn't because the share price kept going down. Can't remember what it went down to, but I think it might have been $11 or $12.

Now this was long before the IPhone and the Ipad had been invented, but I do wonder how many of these people who had bought at $22 in the IPO, got out when the share price fell to that level, quite a few I would imagine.

Correct, I hadn't factored in the share splits. A $2k investment in 1980 would be around the £1m mark. As you say, it would be interesting to know how many folk held firm with it and how many more invested in other tech start ups that went belly up!

Security wise, I'll still be sticking to trackers given the lack of time I have to research and monitor companies.

capital0ne

bd10 wrote: »

I often buy shares if that company in question is not already held by the funds I have. It's a bit more expensive given the dealing charges vis-a-vis none for funds from supermarkets, but if held longer term, that's not material. Research into the candidates to buy precedes that, but that's the fun part (I wouldn't buy a title willy nilly without having done some homework, that'd be pure punting).

Ditto, and what research do you do then, how long would you take researching a potential stock to purchase? Any useful tools? Free or paid for/web based? Please let us all know it would be very interesting and useful.

Cheers

down_the_swanny

capital0ne wrote: »

Ditto, and what research do you do then, how long would you take researching a potential stock to purchase? Any useful tools? Free or paid for/web based? Please let us all know it would be very interesting and useful.

I just ask the clone of Warren Buffett's brain that I'm keeping in a jar in my basement what shares to buy

iglad

After owning Lloyds, RBS and Aviva shares for almost 20 years I've come to the realisation that owning individual shares isn't for the small investor, which is why I sold the lot and reinvested the money into Funds and Investment trusts.