This blog post is about buying individual stocks. If you’d rather watch the video instead, here it is:
I made two purchases recently and I thought they were rather interesting. One was some stock, and the other purchase was a fridge. I put a whole lot of thought into the fridge – a lot of research and measuring and making sure I had the right fridge type and the right make. (An LG with french doors.) As to the stock I bought, well I thought it’d be cool to get into this bitcoin thing so I bought a company – HIVE – that makes bitcoins.
Now which do you think I put more research into? The fridge or the stock purchase? Well, the answer is the fridge! I recently gave some stock buying tips and I didn’t even use any of them for making this decision! It was a spur of the moment kind of thing. And I think that’s a problem – I think lots of people when they buy stocks, they don’t put as much thought into it. Stocks appreciate in value and do you well in the future, to be counted on in retirement. But sometimes we give more though to purchases that last just a few years versus purchases that should help you retire!
I’ll tell you later why I think it might have been okay in this case. But in general maybe I should have learned even more about HIVE before buying in. Like using some of those stock buying tips I recently researched. And there’s a whole lot more to it than that as well. For what it’s worth, I am not a financial advisor so I have to tell you that you need to do your own research and don’t just be trusting me. I’m trying my best, but I’m not expert.
Anyway, say you become an expert: you go to financial school for years, you watch videos, you study books, you learn from mentors. You’re an expert in the field finance and the stock market. Now that you’re an expert, what’s you’re track record going to be like? Hopefully the stock portfolio you put together will beat the market because if it doesn’t, you might as well just buy a market ETF instead – no need to buy stocks yourself. (An ETF is a portfolio of other stocks or funds that usually tracks some kind of index, like the S&P 500.) So all these people that are out there that are experts in the field of buying stock – how well do they do? Well it’s been shown, and you can do research online, that even the experts over the long term don’t beat the market. Over 80% of experts couldn’t beat the market over the long term. Actually there’s a great video on YouTube by Ben Felix about why it’s so hard to beat the market – I highly recommend you look it up. It’s called “Why it’s So Hard to Beat the Market.”
If it’s so hard to beat the market, the question then becomes why do you think that you can beat the market? Because I bought that HIVE stock a little while ago and somebody actually sold it to me. That means that they didn’t want the stock that I did want. So what makes me smarter than that guy? Anytime you do any purchase you can ask yourself: what do you know that the guy who’s selling it doesn’t? So you have to wonder if it’s really worth buying individual stocks. Should I buy individual stocks in my portfolio? The short answer for me is “no”. If you want your portfolio to do well – to beat the market – you’re playing a loser’s game.
Don’t take my word for it. But first, you need to know what and ETF is. An ETF is an exchange traded fund – it’s just a basket of stocks, bonds, or other ETFs and you can buy on the stock market. An typically tracks the an index of some kind. The most popular ones track the S&P 500, or the whole market, or some other big index like the Nasdaq. Now that you know this, here is a quote by Warren Buffett – a pretty famous investor who’s done really well for himself. He says a “low cost index fund is the most sensible equity investment for the great majority of investors.” Another well-regarded investor is Peter Lynch, and he says that “most investors would be better off in an index fund.”
So the question is: should you buy ETF’s or should you be buying stocks? I think that for my retirement an index fund is the way to go. Actually, I am buying more than one index fund in order to diversify. Three to seven index funds, or four to six, depending on who you listen to. I’m trying to figure out the best set of index funds to buy. I already own lots of ETFs but I’m thinking about paring it down because I made decisions that might not have been optimal, so to speak. So I will also be selling some of my stocks. I already sold recently to buy ETFs with. And I’m deciding which ETFs I should buy.
I decided I am not going to buy large amounts of stock anymore. I’m only gonna buy small amounts of stock. A while ago I bought Tesla (TSLA) because my son he really likes Tesla cars. So now we can say that we own a part of Tesla. And guys how many shares I bought? One! 😛 (It has since split). It was a fun purchase, but because I don’t have a crystal ball I decided one share was enough. I also bought a few shares of Shopify, a great Canadian company, because they’re a local firm and a friend of mine started working there. Coincidentally they’re doing really well too. One of my biggest individual stock purchases was AT&T. Some guy on the internet was suggesting them, and he seemed to really know his stuff, so I bought some AT&T stock. Right now it’s down 30%. So yeah… there’s that. That taught me the lessons of a) don’t trust random dudes on the internet – do your own research. And b) individual stocks are always a gamble. One guy on my TikTok channel said speculative investments shouldn’t be more than 1% of your portfolio. Makes good sense to me.