Why does anyone buy individual shares?

John_Smith_2019

BLB53 wrote: »

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.

I think the view you express is the current consensus view.
I think oil companies are oversold right now and I'm buying them.
Only time will tell which one of us is correct.

Linton

BLB53 wrote: »

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.

It would a great strategy assuming no-one else in the market has noticed this clear difference between the long term future of fossil fuel and renewable energy sectors and pushed prices to take this into account.

John_Smith_2019

Linton wrote: »

It would a great strategy assuming no-one else in the market has noticed this clear difference between the long term future of fossil fuel and renewable energy sectors and pushed prices to take this into account.

Also, most oil majors have already moved into the renewable energy industry.

Linton

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

If you are buying individual shares I suggest you do it in at least £2K amounts so that charges are fairly irrelevent and any gains are worth the effort in £ terms. Also you should be holding at least, say 15 individual shares so that you arent hit too badly if one were to go bust. So that amounts to a pot of at least £30K before you start to play with individual shares, in addition to the money you invest in foreign funds. You dont want the UK as a major part of your portfolio.


To successfully manage a portfolio containing a large number of individual funds requires that you spend significant time understanding the financial progress of each of your holdings.


Is it worth the effort?

John_Smith_2019

Linton wrote: »

If you are buying individual shares I suggest you do it in at least £2K amounts so that charges are fairly irrelevent and any gains are worth the effort in £ terms. Also you should be holding at least, say 15 individual shares so that you arent hit too badly if one were to go bust. So that amounts to a pot of at least £30K before you start to play with individual shares, in addition to the money you invest in foreign funds. You dont want the UK as a major part of your portfolio.


To successfully manage a portfolio containing a large number of individual funds requires that you spend significant time understanding the financial progress of each of your holdings.


Is it worth the effort?

Are you assuming here that the investor does not own a fund as their major investment?
ie that their share portfolio is an alternative, rather than an addition to a fund?

DairyQueen

The result of my intermittent and pathetic attempts at single share investment over the course of 20 years should have been sufficient to signal that I didn't have the advanced DIY investor know-how to take-on this level of (high) risk. But nope, took me that long (plus around 3 months on this forum) to have that light-bulb moment.

My last dabble resulted in a 100% gain on one and a total loss on the other.

There is a big difference between being an investor and a gambler and the uninformed have a habit of confusing the two. The common categories of single-share investor seem to be: a) the minority who know what they are doing and ... b) the majority who think they do. Having realised that I have sufficient challenges managing our portfolio without adding to them, I resigned my membership of the second group.

I sleep so much better.

John_Smith_2019

DairyQueen wrote: »

The result of my intermittent and pathetic attempts at single share investment over the course of 20 years should have been sufficient to signal that I didn't have the advanced DIY investor know-how to take-on this level of (high) risk. But nope, took me that long (plus around 3 months on this forum) to have that light-bulb moment.

My last dabble resulted in a 100% gain on one and a total loss on the other.

There is a big difference between being an investor and a gambler and the uninformed have a habit of confusing the two. The common categories of single-share investor seem to be: a) the minority who know what they are doing and ... b) the majority who think they do. Having realised that I have sufficient challenges managing our portfolio without adding to them, I resigned my membership of the second group.

I sleep so much better.

That depends on your perspective.
If you owned that share within a fund or IT, you would still have gained 100% on that share of the fund.

Eco_Miser

To answer the original question, some people buy individual shares because they want to own the company.
This is a high risk strategy, though having control of the company mitigates the risk somewhat.

BLB53

I think the view you express is the current consensus view.
I think oil companies are oversold right now and I'm buying them.
Only time will tell which one of us is correct.

Of course another reason for avoiding index funds is ethical. I can select the individual shares which support clean energy and therefore align with my values. This is impossible with holding index funds which contain fossil fuel companies which are so globally destructive to our climate and future well-being.

I could not sleep easily at night knowing I invested in these large fossil fuel companies!

John_Smith_2019

What I find interesting, is that so many people subscribe to the efficient market hypothesis when it comes to tracker funds.
But when it comes to the constituent large cap equities, they claim you need to be an expert to evaluate the share price.

The problem is that so much advice given online needs to be generalised. But in fact everyone is different in terms of their requirements and preferences.

My approach is to try and understand how everything works, then I can apply that knowledge to my own situation - allowing for a margin of uncertainty.