Monday, September 14, 2009

Stocks vs. Mutual Funds

I like investing in mutual funds. My main obsession is with the "Target 20_ _" mutual funds. Pick a target year to end, and you're set. The mutual fund automatically changes its stock vs. bond allocation so you don't have to worry about a thing. Love it.

The financial planner in me loves individual stocks as well. It's kind of like trying to find the next "hot thing" in a pile of mediocrity. I like donning my talent agent glasses and trying to find the next Will Smith. How do you do this? You look at fun stuff like betas, average annual return, debt-to-equity ratios, profitability percentages, and then you get out your crystal ball on what the future has in store for different market segments. And then things go topsy turvy, and you try to sound intelligible as you try to justify why you thought Washington Mutual was a good buy in August 2008. True story.

The upside with individual stocks is that you have a larger potential for gain. The downside, of course, is that you have a larger potential for loss. Plus, there's the babysitting factor for stocks you want to keep for the short or mid-term.

Yes, folks, if you want individual stocks in your portfolio, you must babysit them. Check up on them at least once a week, see what's going on with the company, the new products coming out, the "buzz," their last quarterly earnings and profitability.

For over a year I haven't checked on my individual stocks. Folks, I have forgotten the individual stocks that I have. I know I have some Microsoft, some Procter & Gamble (thank you, Tide and Charmin users!) and ... some others I can't remember because I'm having a bit of a hard time remembering my Sharebuilder password.

I will be checking in this week and going through those stocks. First step: Logging in. Second step: Seeing what stocks I own.

Yeah, I've been a sucky stock babysitter.


Anonymous said...

What if you want to make sure you're only investing with companies that meet your demanding ethical/moral standards? What do you recommend?

Miss J's Mom said...

I would say that you should invest the same way, for the most part. If you have the time and the interest, then select some individual stocks that are socially conscious. If you don't have the time or energy, then I would go with a mutual fund. There are many socially conscious mutual funds out there. You can find more information on socially conscious mutual funds here: