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Indexes or individual stock investment?

  • 24-05-2015 10:24pm
    #1
    peege
    Registered Users, Registered Users 2 Posts: 70 ✭✭


    What preference do most of you have when investing? What percentage of your investments would be in actually individual company shares or would you invest in the indexes eg FTSE,ISEQ etc or even in ETFs?

    I am just trying to get a general idea of what makes a good portfolio.

    Diversification is recommended in a lot of literature, buying across the assist classes etc but in terms of the charges a part time investor would incur in trying to establish a diversified portfolio of individual company shares would you be better off to invest in ETFs or indexes?


Comments

  • #2
    Nody
    Moderators, Category Moderators, Arts Moderators, Business & Finance Moderators, Entertainment Moderators, Society & Culture Moderators Posts: 18,375 CMod ✭✭✭✭Nody


    Personally if you start out a value based index (rather than a pure index fund) is the way to go and you can read why in "The Big Secret for the Small Investor: A New Route to Long-Term Investment Success" which is very short, very small book which clearly outlines the general issues with funds and index based funds in general.

    If you're building your own portfolio I'd say no more than 10% in any single stock and you'd want the fee(s) paid for said shares to be ideally 1% or less of the share value to not buy too small positions (or the fee will start to add up quickly). One way to do that is simply to save up in a cheap fee index fund until you you can remove 50% of the capital to buy one share (the index fund helps keep you somewhat balance; hence why you'd never want to empty it to buy one stock at the start).

    Personally I aim to hit around 20 to 30 shares in total in my current portfolio (dividend based); after that I'll start up a second portfolio with another investment idea etc. and let each portfolio reinvest into themselves. The reason for the split is simply to avoid the temptation of trying to plug one portfolio with funds from another (see the book above on human nature) in case it's a poor plan / execution on my side. They will live and fall on their own so to speak ;)


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