Why does anyone buy individual shares?

Thrugelmir

arwain wrote: »

A regular poster on here bostonerimus has averaged something like a 9% annualised return on his tracker investments over a 30+ year period.

Inflation was a lot higher in the past. That needs to be factored in.

Likewise the 40 year bull market in bonds is over. After decades of decreasing interest rates.

Prism

benbay001 wrote: »

Your attitude sucks.

Just because you arent capable of doing something, dont assume others arent.

Im 27, have been investing for just over a year, have a book shelf full of value investing books and probably spend 2 hours avg per day learning/ researching.

The overall value of my portfolio is low. I completed an apprenticeship in September, subsequently bought a nice car on loan and am blitzing the loan before making any more ISA contributions.

My Portfolio currently holds
SDY - 28% £447
TIFS - 9% £859
IAG - 4% £644

Finally: SMT - which is currently -1%

As i said, which you so quickly dismissed, if you exclude SMT (which i think is fair, considering its an investment trust, rather than an individual company, i am up 31% over the year.

(£1963-£1497)/14.97= 31.1%

If you include SMT
(£2584-£2118)/21.18= 22%

Please point me in the direction of an index fund that would have made more.

My returns would have been higher if i wasnt playing with such small amounts as fees make up a significant amount of the cost per share.

One of the reasons not many people do well from individual shares is that its difficult to do over the long term. To make this kind of return from value investing you need to make good calls on the highs and lows of stocks multiple times over many years - not easy to do. You say that you are spending 2 hours a day at the moment on research but I think its fair to say that most people want to spend close to zero hours a day on it and therefore funds are more appropriate for them.

If you take IAG for example, it provides very little return at all in terms of its overall long term price, however it does have a good dividend. To make higher returns of it you need to sell on peaks and buy on dips which most people find difficult to do. You also have to factor that airlines are at higher risk from going bust and can drop significantly in value due to outside factors like fuel costs, wars, weather etc. Volatile stocks like that can be good ways to make additional returns but it can also go terribly wrong too.

Thrugelmir

Prism wrote: »

If you take IAG for example, it provides very little return at all in terms of its overall long term price, however it does have a good dividend. To make higher returns of it you need to sell on peaks and buy on dips which most people find difficult to do. You also have to factor that airlines are at higher risk from going bust and can drop significantly in value due to outside factors like fuel costs, wars, weather etc. Volatile stocks like that can be good ways to make additional returns but it can also go terribly wrong too.

IAG is a cyclical stock not a value stock. Value stocks are generally found lurking in the netherworld of the investment universe. Either forgotten or shunned by investors. The value is to be found in the balance sheet. Where the assets exceed the liabilities to the extent that investing in the company is greatly mitigated. As Bejanjamin Graham put it, you buy a $1 for 50 cents.

To be a value investor. One needs to take both a long term and contrary view while having patient and discipline.

JustAnotherSaver

Question for the ones who have cockily replied: well *I* am beating the market.

What is your golden key to unlocking this guarantee that means you have not just simply been ‘lucky’?

Aegis

In my own case, I like to have a little flutter on AIM shares where I think the company has a good prospect of doing exceptionally well if they get off the ground. "Beating the market" is fairly irrelevant for me, as there are some fairly huge well-established AIM shares that probably shouldn't still be AIM but stay there for tax and cost reasons. I don't claim to be an expert on this type of investment, but if I see a really good idea I'll try to put a bit of money into it.



This is quite apart from my core investment strategy which uses funds and investment trusts.

Thrugelmir

JustAnotherSaver wrote: »

Question for the ones who have cockily replied: well *I* am beating the market.

What is your golden key to unlocking this guarantee that means you have not just simply been ‘lucky’?

I always ask the question which market? Choosing the wrong market can be costly.

There's no golden key. Investing has absolutely no guarantees. Though as with anything in life. The more effort you put into something, the greater the likelihood of success. Nothing comes for free.

Prism

Thrugelmir wrote: »

IAG is a cyclical stock not a value stock. Value stocks are generally found lurking in the netherworld of the investment universe. Either forgotten or shunned by investors. The value is to be found in the balance sheet. Where the assets exceed the liabilities to the extent that investing in the company is greatly mitigated. As Bejanjamin Graham put it, you buy a $1 for 50 cents.

To be a value investor. One needs to take both a long term and contrary view while having patient and discipline.

Maybe thats one way of looking at it. Using Morningstar and MCSI categories IAG is a value stock (currently) in a cyclical sector. Value investing can be short term trading or long term contrary views, just like growth or momentum investing can be. I think most would say that Buffett leans towards the value style of investing but obviously can't for scale reasons be looking at those forgotten stocks.

Prism

JustAnotherSaver wrote: »

Question for the ones who have cockily replied: well *I* am beating the market.

What is your golden key to unlocking this guarantee that means you have not just simply been ‘lucky’?

I use mainly funds not individual stocks but for me, along with luck, the main criteria is to avoid all the dross, and then pick between what is left.

Thrugelmir

Prism wrote: »

I think most would say that Buffett leans towards the value style of investing but obviously can't for scale reasons be looking at those forgotten stocks.

Buffet (as in BH) is now the market. In the days when he was building holdings in company's. Trading settlement was paper based. Easy to hide ones activity. Using multiple brokers concurrently to buy smaller parcels of stock. Now there's total transparancy. Prices react within seconds to major activity.

abz88

Eco_Miser wrote: »

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.

The average individual investor that buys individual shares will have not control over a company. Investors with enough voting clout to actual influence/control a company are institutional investors and the odd billionaire. If you think owning a few thousand pounds worth of shares in a company mitigates your risk through control, then you are sadly mistaken.