hartman wrote:
- quote -

Financial planners do this, mutual fund managers do not.

-Will

Mutual funds come with the luxury of a professional manager, who can help
you in making decisions, who can tell you about the current economic
conditions and where your money fits best

In stocks however, you don't get this kind of a professional manager,
gotta buy/sell yourself!

Thus, this makes stocks more riskier

Don wrote:
- quote -


Buy at least one share of stock *and have a certificate issued* (or
maybe some electronic equivalent.) The stock has to be in your name
rather than just "street" name, and there's usually another fee for
that. But at least it's a one-time fee and not an ongoing expense.

Best regards,
Bob

"anoop" <ghanwani[at]gmail.com> wrote in message
news:1123770355.786609.225430[at]o13g2000cwo.googlegroups.com...

- quote -

That is true, and also for some DRIPs you have to be a stockholder before
beginning the plan, so you have to buy at least 1 share of stock through a
broker before signing up for the DRIP. But there are also many companies
that do not have this requirement. For the benefit of newcomers, it should
be emphasized that the small commissions you mention above are for the vast
majority of companies very, very small compared to brokerage fees and that
the overall savings in commissions for DRIPs are substantial in the long
run. Many companies do not even have these small commissions for either
initial purchase or dividend reinvestment.

Don wrote:

- quote -

You will still have some expenses. Most drips charge a small
commission
to buy, in some cases for dividend reinvestment, and finally, you'll
pay a commission to sell. It's lower than a mutual fund's onging
expenses, but it's not zero.

Anoop

"Robert Anderson" <nonspam[at]nospams.com> wrote in message
news:11eq1p4s5h5ciac[at]corp.supernews.com...
- quote -

I have been successful with dividend reinvestment plans (DRIPs). With these
plans, you can buy stock directly from a company with no loads, management
fees, or brokerage fees at all. One way to avoid the "gambling" you mention
is to select well known, blue chip companies that pay dividends. I have
concentrated on companies with a history of gradually rising dividends. You
can also lessen the risk by setting up DRIPs in maybe 5 or 6 or more
companies, all good blue chips. It like having your own private little
mutual fund with no expenses.

Ron Peterson wrote:
- quote -


Hire a stock picker: Find a mutual fund managed by a superb stock-picker
(I like OFALX and TAVFX, but Olstein's expense ratio is kind of high).

Also, you can't go too wrong buying spyders at a discount broker as long
as you don't try to dollar-cost-average in with a bunch of tiny
purchases. (in that case, use a Vanguard index fund.)

Best regards,
Bob

The longer the stocks are owned, the lower the cost of ownership.

Mutual funds charge fees each year as a percent of assetts. The more
one owns ($10,000), the more one pays (around $12/year?) that's a .012
expense ratio, right?

with stocks, I can buy stocks for between $4 and $12 a trade, so one
$10,000 purchase costs me the same amount in first year, then each year
I hold stocks, my average annual expense goes down until I pay to sell
the stock.

a caveat to individual stocks is "new" investors and "working
investors" invest less than $10,000 and may invest each month. I buy
$500 of stock each month at $4/trade, so at year's end $6000 of stock
cost me $48. In my eyes, if I hold for 4 years, I break even on
expenses with mutual funds and I control the taxable events
(distributions).

If one can see in the 5 best performing large cap funds, that each fund
hold the same securities, then purchasing the individual stocks
directly may be a cheaper alternative which "gives more money at the
end of the pipe" for that asset class.

This is not to say one will get equal performance from investing in
both mutual funds and stocks. "More money at end of pipe" depends on
expenses and the selection and performance of the securities.

Ron Peterson -

You wrote:
- quote -

Peter Lynch's book(s) cover some of that. I agree that management and
the company's abilities to adapt to changes are an "intangible" that
can lead to a sudden drop in price on declining earnings news. Lynch, I
believe, argues that out of a portfolio of ten stocks, your two-baggers
and five-baggers (doubles and quintuples) will more than offset the 50%
decliners, and if you do your homework, you will limit the decliners to
one or two at most. I like to use SHW (Sherwin Williams) as an example
of a good company since 2000. They don't have a big diversification in
product line (just paints), but the steady stream of increasing
earnings lends a lot of credibility to not just the current management,
but to the management policies, or principles if you prefer, of the
company. In the face of declining tech, it wasn't an outrageous
speculation to assume that the housing market, together with reading
the management's analysis of the company, would lead to increased
earnings. "The Motley Fool" did a recent piece on IR (Ingersol Rand).
David Efflandt (below) illustrated more than just a few important
points. I read that Warren Buffet, before making one of his first
investments in American Express, asked a local resaurant owner if he
could watch as his customers paid their checks. He noticed that the
very few who had credit cards (back then) presented them p-r-o-u-d-l-y
at the register. He concluded, the story goes, that credit cards would
catch on. First hand contact with a business, as Mr. Efflandt
describes, (or: Lowe's v. Home Depot, Office Depot v. Staples, and many
others), coupled with an analysis of the corporate numbers, can help
resolve some of the "intangible" questions. Perhaps another point is
that a really good stock investment does not have to be a big company -
some local public company one has first-hand contact with can do very
well. A cousin invested in a local S&L because he knew their top
management, and really was very impressed with the business ... ten
bagger.

- quote -

There's no way I can argue against that. I think the principle is that
if an individual is willing to "take the effort to keep abreast of
investment possibilities", he can get a higher return than he gets by
paying someone to invest his money for him.

On the other hand, as you wrote earlier: "I don't see how it is easier
to be a mutual fund picker than a stock picker. To estimate how a
mutual fund will do one has to estimate how each stock in the mutual
fund will do and then total up the weightings."

I see some fund portfolios that I don't understand, and feel I could do
better. So I don't have a lot of experience with funds. DODGX has done
well, and there are some other selections in this forum that sound
worthwhile.

Back to the original post: if the man has asked about stocks v. funds,
I don't see where it would harm him to do some reading about
corporations, earnings, and financial analysis. Then he can decide for
himself, after "paper trading" which way he wants to go.

On Sun, 31 Jul 2005 13:53:52 CST, Leigh Menconi <lmenconi[at]earthlink.net> wrote:
- quote -

If a mutual fund is in a tax sheltered account (IRA, 401K, etc.) then
dividend and capital gains are not so much of an issue. But my boss was
really pissed a couple of years ago when his funds lost money for the year
and he still had to pay tax on capital gains from stocks trading within
the fund.

I was lucky that 1/3rd of my money (IRA's) was making was making 4.5% or
better fixed rate in the past 5 yrs instead of the negative S&P 500. But
I got a handle on mutual funds from my 401K and am transferring my IRA's
to a self directed account where I can hopefully do better. But I am just
learning about stocks.

My first taxable stock purchase was a conservative direct purchase with
dividend reinvestment of a company with modest 5% average gain plus 4.5%
dividends over the past 5 years. But they have improved customer service,
expanded their branches, and increased earnings reports, so I figure at
long term capital gains rate I should easily net more than twice the 5.99%
(4.5% after tax deduction) that I am paying them for my home loan. Even
considering that more than a third was purchased after the price went up,
I gained a total (above fees) of 3% total growth and dividends in 2
months. Kind of ironic if they end up paying me more than they charge me
for their money.

"Ron Peterson" <ron[at]shell.core.com> wrote in message
news:1123016816.209712.285720[at]z14g2000cwz.googlegroups.com...
- quote -

Contrafund is one of the most consistent U.S. equity funds around, as
measured by variation, so you may not do too much better. But you might try
looking at Hussman Strategic Growth Fund, which specifically emphasizes
capital protection (and as a consequence, reduced volatility). According to
Morningstar, it is the least volatile domestic equity fund around (again, as
measured by variation).

- quote -

Agreed, and all of which makes, IMHO, investing in individual stocks more
difficult than investing in funds. (Bonds are different because like funds,
they're more of a numbers game, and there is less importance placed on
intangibles, such as the ones you mentioned.)

--
Mark Freeland
nNeEwTs[at]sonic.net

dapperdobbs wrote:

- quote -

I would like to find some good mutual funds that are a good substitute
to stock picking, but it's hard to find consistent performers. I am
using Fidelity Contrafund in my deferred comp account now, but will
probably change when I can find something better.

- quote -

I think that the accounting fundamentals like ROE, P/B, P/S are a good
starting point, but there are some pitfalls to worry about including
bad management and products that lose their ability to be sold.

- quote -

That's where good mutual funds would be a help because I could
recommend them to people that don't want to take the effort to keep
abreast of investment possibilities.

--
Ron

Ron Peterson -

Thank you. I agree with you that a selection of stocks is a better way
to go.

Ben Graham's book is pretty tough to work through, imho, but it
provides a workable investment policy to follow. In my view, "stock
picking" is largely a function of math, or accounting.

The hard thing to do, and the serious business, is trying to help
someone. I guess that's why women change into "Mothers" and start
carrying not just big sticks but huge clubs.

Best to you.

"Ron Peterson" <ron[at]shell.core.com> wrote
snip
- quote -

Given the alternative (to gamble on presumably only a limited number of
invidual stocks or to go chasing returns of mutual funds, a proven failing
strategy), yes, it is.

Will Trice wrote:
- quote -

I don't see how it is easier to be a mutual fund picker than a stock
picker. To estimate how a mutual fund will do one has to estimate how
each stock in the mutual fund will do and then total up the weightings.

OK, maybe the mutual fund manager is a better stock picker than the
purchaser is, but there isn't anyway of knowing except by looking at
past performance which may say nothing about future performance.

Of course, mutual funds change their portfolio to look like they have
been picking the recent winners.

One can pick a broad index fund, and match the average performance, but
is that good enough?

--
Ron

Robert Anderson wrote:
- quote -

Robert,
Individual stocks are not a required part of any investment portfolio,
you can do perfectly well investing only in the things you've mentioned
(assuming your mutual funds include some that invest in stocks). And
that applies, really, all the way from the first $1000 invested through
"high net worth." In fact I believe that most people will do better
owning stocks through stock mutual funds, rather than by picking
individual stocks. "Better" meaning "more money at the end of the pipe."

I also believe that anyone willing to educate themselves about
stock-picking, and to spend time keeping up with their investments, can
learn to pick stocks. But that takes time and I think most people don't
bother devoting enough of it to the education step. And my hunch is that
if you view stock picking as gambling, you should stick with mutual funds.

-Tad

dapperdobbs wrote:
- quote -

This may be the standard answer, but the real answer should be do you
have the time, patience, and risk tolerance to be a stock picker?
(Maybe talent should be thrown in there, too?)

-Will

"Leigh Menconi" <lmenconi[at]earthlink.net> wrote in message
news:N69He.7932$6f.3662[at]newsread3.news.atl.earthlink.net...

- quote -

Thanks.

Then mutual funds are optimal for retirement funds but not so great for
investments outside of retirement funds?

--
Robert Anderson

Robert -

The standard answer is look at your overall picture and your overall
objectives. Usually, this is a function of Income v. Expenses, with age
thrown in. Run some spreadsheets covering your life expectancy (sorry
... but that's the way it goes). The rule of thumb is the younger you
are the more risk you can take, but obviously if you have a retirement
paid for and are not a big spender, you might wish to stick with CD's
or other fixed income.

If you are 20-40 years old and do not have your retirement objectives
met - in other words, the expected returns from your current mix will
not meet your objectives - then start learning about stocks. I always
recommend "The Intelligent Investor" as a starting point.

While any investment in stocks is not without risk, reading that book
will clarify for you that a good investment is a plan to make money
based on reasonable (and studiously calculated) expected returns.
Gambling is generally recommended as a plan to lose money for the
entertainment value of the entire experience.

You got it exactly right when you used the words "... researching and
buying good individual stocks." If you are careful, methodical,
patient, and thoroughly understand the science portion of investing
(e.g. have read a book or two), you, too can have a beautiful financial
chest and six-figure abs with only 15 minute workouts three times a
week! Don't be a $98,000 dollar weakling any longer! Order now, and for
a limited time receive an exclusive 40% discount off the list price of
all stocks! (E.g. 1987.) And as if that weren't enough ... buy now and
get two for the price of one! (E.g. stock splits.) Research and buy
good individual stocks, but read up and study up before you invest. It
may take you a year to learn - you should always excercise patience -
but you can begin a "paper portfolio" as a study tool. Hopefully that
will show you your mistakes as well as your successful actions, and you
should follow up on both until you see both your mistakes and
succcessful actions. There are many stocks that have outperformed - I
favor mid-cap growth. There are a number of good books out there (and a
lot of 10K's).

That said, I return to emphasizing that your savings (and investments)
are a plan. So keep an eye on how you would (or will) g-r-a-d-u-a-l-l-y
integrate a handful of stocks into your plan. It's a plan, it's math,
it's your life-span, and it should all fit together to form a realistic
and all-inclusive picture, with every chance of coming true.

Robert Anderson wrote:
- quote -

"expert" in investing, by any means. However, I've been doing a lot of
reading on my own behalf as a near-retiree. So here's one side of the
argument, and I'll let others make the other.

I would tend to agree overall that concentrating in individual stocks
can be a little like gambling, and purchasing a LOT of individual stocks
is likely to cost you a lot of labor and possibly anxiety, in monitoring
performance. Before you get too wrapped up in trying to choose
individual stocks, it might be a good idea for you to read a book that
seems pretty sensible on the mutual fund alternatives: "Mutual Funds
for Dummies" by Eric Tyson. If you select a fund with a low management
fee (generally under 1.5% per year, often a good bit less than that),
that has a record of doing better than markets overall for at least 10
years, you get the advantage of diversification that no individual stock
can offer you. Tyson also recommends good mutual fund companies that
have well established track records for both high performance and
ethical behavior.

My two red cents, for whatever they're worth...

R.A. Lawhern, Ph.D.
http://www.lawhern.org
"Giving Something Back"