Why I Don’t Like Individual Stocks

Why I Don’t Like Individual Stocks

by Sally Pessin, Esq., CRPC®

When I was 15 or 16 years old, the hot pick in the stock market was Polaroid, makers of the instant camera.  Each day, I watched my mother and stepfather follow the value of their shares in the newspaper.  One day I asked if I could buy some shares.  Once they agreed to purchase shares for me through their broker, I handed over 250 dollars of my hard-earned babysitting money.  Often, when you buy a “blue chip” stock and forget about it for many years, it can grow tremendously.  However, in my case, the opposite was true.  Polaroid’s main source of revenue had been from its instant film, but once digital cameras became popular, the company tanked.  I never bought an individual stock again.

In my 30s, my father introduced me to mutual funds – big baskets of individual stocks.  The S&P 500 Index Fund, the original set-it-and-forget-it mutual fund, represents the leading 500 publicly traded US companies.  If one company in the bunch goes bust, you still own shares in 499 spectacular companies buffering any losses.

In the last several years, I have inherited a handful of individual stocks which represent only a small fraction of my portfolio.  Some of them of have doubled and one even tripled in a relatively short period of time.  However, many of them have stayed flat or worse, have faltered.  But there is no way to know if those so-called losers may recover and rally. This makes individual stock picking akin to gambling.  It’s a fact that over 90% of stockbrokers cannot consistently beat the S&P 500 Index.  Roller coasters have always made me queasy – I’ll stick with the slow and steady pace of the gentle merry-go-round ride of owning mutual funds.

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