Why does anyone buy individual shares?

John_Smith_2019

bowlhead99 wrote: »

If you buy a fund that has a strategy of buying the shares when it's manager thinks they are cheap or offer relatively good prospects in relation to the market cycle, you would get the shares that the manager thinks that represent good value or prospects etc. You would also benefit from pooling resources with other fellow investors, diversifying risk across the collective investment scheme.

Perhaps you fundamentally misunderstand how an index (or a fund which tracks the index) works.

For example, if BP is 4% of the index today and drops in value by three quarters to only be worth 1% of the index by this time next month, the tracker fund will find that its holding of BP is had reduced in value from being worth 4% of its portfolio and now makes up only 1% of its portfolio.

As the BP holding is still the 'correct' proportion of the fund's portfolio with respect to the proportions of the index constituents, the fund has no requirement to 'sell the BP shares in proportion', to get its BP shares down to 1% of its portfolio. It already has the correct proportion.



I don't see how it is a big or 'bigger problem' that some fund managers decide not to hold certain stocks due to environmental, social or governance reasons. They will have flagged such strategies to their investors in advance. If someone chooses to buy a fund with that strategy (either actively managed or an index with certain ESG filters) it will not be much of a surprise, or a big problem.

Yes, that is true. I see what you mean.
But in this scenario, as more money comes into the tracker, only 1% of this new money will now be allocated to buy more BP shares. Not 4% of the the new money coming in.
So because BP shares have got cheaper, less new money is being allocated towards them.

In contrast, if I pick just five FTSE 100 shares and each month I was to buy £100 worth of each of these shares (no matter what the share price), I would be buying more of the shares when they were cheap and less when they were expensive.

cloud_dog

Isn't this thread another of CapitalOne's FIFO posts?

eskbanker

cloud_dog wrote: »

Isn't this thread another of CapitalOne's FIFO posts?

You spelt GIGO wrong....

John_Smith_2019

ZingPowZing wrote: »

I buy shares that outperform, so pretty much the opposite of John Smith. Luckily, we both invest in the stock market, as every transaction needs a buyer and a seller. But funds discriminate against either position: some cap the % of any individual share in the fund by selling the star performers.

You mean you buy shares that have outperfomed, up until the day you buy them.
And you hope they will continue to to perform well.

hit_and_run

eskbanker wrote: »

You spelt GIGO wrong....

HIHO, HIHO, it's off the topic we go ...

bowlhead99

cloud_dog wrote: »

Isn't this thread another of CapitalOne's FIFO posts?

I'm not quite up on all the slang that the cool kids use these days but certainly capital0ne has cemented a reputation on these forums as someone who has a relatively low level of knowledge yet is desperate to have people to think he is an expert who has it right all along.

For example earlier this year on the Annual Returns thread he started:

capital0ne wrote: »

Prism wrote: »

capital0ne wrote: »

Morningstar shows performance figures for example Annual Returns
...
And Annual Returns% is defined as:
Annual returns %
The performance of a fund over calendar year periods.

My questions are:
1. Does this include dividend reinvestment? I don't think it does.

Morningstar includes dividend reinvestment in its returns.

Thanks for that, it's as I thought, just needed confirmation

Or the Calculating CGT tip thread:

capital0ne wrote: »

An investment I have outside of an ISA wrapper has increased in value by 32.55%

The CGT allowance for 2017-18 is £11,300

To work out the value of shares to sell to remain within the CGT allowance you simply divide £11,300 by the percentage increase.

In this example the calculation is £11,300 / 0.3255 = £34,715 is the value of shares to sell and remain within the CGT allowance for 2017-18

Quite simple really, but some people may struggle with working this out. :beer::T:beer:

bowlhead99_and_Tom99_and_others,_paraphrased wrote:

Your maths is nonsense- this is how you should do it...
...

capital0ne wrote: »

Thanks Bowlhead, and Tom99, my tactic worked. By posting an answer that wasn't quite right challenges people to put it right

And now we have this one where his previous history of buying single equities (e.g. the legendary amusing 'Just used my full ISA allowance' thread) has somehow morphed into a message that anyone who buys individual equities is an idiot and talking hogwash if they think they are right to do it.

capital0ne wrote: »

I've just used up my full ISA allowance, when you get to a largish portfolio, it's meaningless to buy in anything less than £10k in my case because it would be such a small single digit percentage of my total sum. So i only invested in two equities.

I'm sure many of you have the same problem. Makes drip feeding a complete waste of time.

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

Over time, we've mostly all realised that he is just parroting things he's heard from other people or trolling with provocative statements in the hope that someone will say something in reaction that he can learn from; one suspects he would learn faster if he would just admit he doesn't really understand the concepts and is perhaps seeking an education.

[Deleted User]

I would probably buy individual shares to make a small part of my portfolio however the £10 buy/sell fee is too much

EdGasketTheSecond

newbinvestor wrote: »

I would probably buy individual shares to make a small part of my portfolio however the £10 buy/sell fee is too much

Try iWeb, they have a £5 buy/sell fee

John_Smith_2019

newbinvestor wrote: »

I would probably buy individual shares to make a small part of my portfolio however the £10 buy/sell fee is too much

That is a good point.
That's why I only buy a few and intend to hold them for a very long time.
The longer you hold them, the smaller that £10 becomes in relation to the ongoing fees of a fund.

BLB53

I buy shares in sectors which I think will outperform the index. For example renewable energy shares in Orsted and Siemens Gamesa will probably do better than coal and oil stocks due to the moves to tackle climate change and the divesting of fossil fuel companies.

Some sectors are clearly on the 'up' escalator whilst others are obviously on the way down.