Do some people buy individual stocks plus their index funds?

[ramy6et]

I started investing in 2021 and I picked 7 stocks, my 'Lucky 7' to buy from. I started buying monthly pieces of them. Surprisingly, they did okay considering the environment we are in. The stocks I picked were mostly household names companies listed on the Dow Jones or the S&P 500.
I picked 7 because I have seen lottery tickets, scratchers, that read 'Lucky 7' and then the slot machines at casinos.
Many people that know investing very well, have said that if I really like my 7 stocks, that it is a good idea not to add anymore into them, just to keep them and hope they appreciate over time. Instead they suggested the 3 part Bogle portfolio, 1 index fund for the entire US market, 1 for the overseas market, and 1 index fund for the bond market making up no more than 30% of the investment portfolio. Anyone else here have an index fund or funds plus their favorite stocks? How common is this?

 

[johnnie4jesus]

@ramy6et Yeah, I played stock picker with 3% of my portfolio. It started out as 5% (ba-dum DUM).

 

[ramy6et]

@johnnie4jesus So you think this is a bad idea, even if they are household names?

 

[missy90]

@ramy6et It's a bad idea to expect this to significantly improve your returns; people do it for fun because they enjoy stock picking, but don't let it become a significant part of their portfolio. Market returns are heavily skewed - meaning that roughly 4% of all listed stocks account for 80% of the growth. You might get lucky - 4% represents much higher odds than lottery tickets - but you need to manage your expectations.

Also, those 'household names' are already a very large part of a cap-weighted index; a lot of people (including myself) will factor tilt partly to try and get away from that. Look at the top holdings of VTI: Apple (6.38%), Microsoft (5.54%), Amazon (2.74%), etc. Those are your household names right there.

 

[ramy6et]

@missy90 I have VTI, plan on getting VT, then BND as the core of my portfolio.

 

[chaosensues]

@ramy6et Great time to buy BND now, even if you aren't planning on holding to maturity.

 

[ramy6et]

@chaosensues Yeah, I was just looking at BND, from vanguard. Just buy it monthly to build that part of my portfolio, hang on to it, and let it do its work. I want to retire like a Protestant, except without the blue eyes and freckles.

 

[chaosensues]

@ramy6et I thought I'd be in 100% equities until I'm 45, but BND is at an all time low due to the current interest rate environment. I just bought $1,200 worth in my IRA and will likely just sell high when interest rates drop again. I'll make it a permanent holding in 12 years of so. Until then, I'll just buy low, sell high, like anything else. A lot of people wondering why they are 40% down on BND because they bought when rates were low.

I'm glad you know how you want to retire, I'm just trying to build wealth at this point and maybe I'll retire with enough money to be able to live on something other than spam musubi LOL

 

[johnnie4jesus]

@ramy6et I gave no opinions, only an anecdote

 

[floramay]

@ramy6et Whether you have heard of them before isn’t a good predictor of whether their common stock will/won’t do well.

 

[zaverax]

@ramy6et Yes. People like to gamble, and people overestimate their ability to pick winners. In the long run, there’s an extremely high likelihood that your individual stocks underperform the index, but so long as you’re mostly index or diversified investing, you’ll probably be fine.

 

[omandi111]

@ramy6et I did the same a decade ago with only 5% of our net worth. Bought ten company stocks. Big names not going anywhere. Think Delta and Apple. Did ok but recently sold all of it and I’m now 100% index. It’s just simpler and safer.

 

[ramy6et]

@omandi111 How long did you hold them for before you did not like the returns on them?

 

[omandi111]

@ramy6et Never paid attention to that really. Buy and hold long term investor.

 

[ramy6et]

@omandi111 I am leaning towards keeping my 'Lucky 7' because they are dividend reinvestment, think of names like Microsoft, McDonald's, Goldman Sachs. But, I may not add more to them and just go with index funds. Thanks for your answer.

 

[angelgirl4890]

@ramy6et Chasing dividends, especially if you are investing long term is a bad idea. Worse if this isn’t in a tax advantaged account.

 

[biggsandwedge]

@ramy6et Buying big, familiar names without serious research is the trap many people fall into. But if you do want to gamble and have some fun, as I do, buy something currently small or beaten down that could go up by 3x so you have some fun money.

 

[ramy6et]

@omandi111 How long did you hold them for before you did not like the return on them?

 

[ramy6et]

@omandi111 I want to retire like a Protestant too, except without the blue eyes and freckles.

 

[ramy6et]

@omandi111 How long did you hold them for before you did not like the returns on them?