STONKS.
Let me be the first to say, I love an index fund.
I do a lot of single stock investing because shoveling money into T (AT&T) or XOM (Exxon Mobile) can bring back a lot of returns.
And also risk.
This choice comes down to two things: 1) your risk tolerance and 2) your desire to be a hands-on investor.
For me, my risk tolerance might be slightly more aggressive, and I LOVE active investing (and trading, in separate accounts, of course).
That being said, I’m not a fortune-teller, and I don’t know if WFC (Wells Fargo) and WBA (Walgreens) are going to be around in 30 years.
Since I don’t have the time to manage 500 single stocks (also, why would I if VOO would do that for me?), enter index funds and exchange traded funds (ETFs).
I like ETFs because they trade like stocks and make chart-reading easier for me. Not a big deal if you just dollar-cost average.
I may cycle out of single stocks over time, who knows. But in the meantime I do plan to shovel more money into index funds and ETFs over time to manage risk a bit more. Right now, less than 8% of my investment portfolio is in index funds, but I’ll aim for more over time.
I’ve been with Fidelity for the last decade, so I utilize some of their funds like FZROX, FDVV, FIDI, FDGFX, etc. Vanguard, by far, seems to rank highest as far as customer service and quality as a company overall. Just a note, you can still invest in those badass Vanguard funds, even if you’re with Fidelity, Schwab, etc.
I would never recommend single stocks to anyone unless they wanted to look at their investments frequently to ensure allocations are proportionally sound (as in, maybe don’t have 25% of your account in TSLA, yikes).
Money is so incredibly personal. So many factors go into decision making, so it’s hard to make any recommendations unless it’s purely from a mathematical standpoint.
That being said, index funds and ETFs are pretty much great for everyone, and if you’re part of the small percentage that WANTS to look at their investments all the time to make necessary tweaks, you could dabble in single stocks.
But I still think you should have a good chunk in index funds and/or ETFs!
Are you team index fund? Or do you like a more hands-on approach with single stocks?
-K