Point of picking your own stocks vs say SPY or DIA ?

Discussion in 'Stocks' started by Nexen, Aug 21, 2010.

  1. Nexen


    I still dont understand why investors make their own portfolios thinking they can outsmart institutions like Standard and Poor and the likes with minimal managing costs with constant studies and rotation.

    Isnt it better to just go SPY or DIA and obtain the great included diversification instead of dreaming about your superiority to pick stocks only to fail like most do ?

    After what happened to BP, I'm not sure how people trust individual companies instead of indices ETFs or funds.

    Just some thoughts hopefully looking for some answers.
  2. The whole point of trading individual stocks -- particularly momentum kind trades -- is to maximise stock-specific tendencies, not minimise them.
  3. Investing in index funds is like resigning to being just average. Some of us like to think that we are above-average investors (even if it's not true). Some of us like to hope we are above-average, but we won't know until we try.
  4. Beta: Know The Risk

    How should investors assess risk in the stocks they buy or sell? As you can imagine, the concept of risk is hard to pin down and factor into stock analysis and valuation. Is there a rating--some sort of number, letter, or phrase--that will do the trick?

    One of the most popular indicators of risk is a statistical measure called beta. Stock analysts use this measure all the time to get a sense of stocks' risk profiles. To learn about the basics of beta, take a look at Beta: Gauging Price Fluctuations ( http://www.investopedia.com/articles/01/102401.asp ). Here we shed some light on what the measure means for investors. While beta does say something about price risk, it does have its limits for investors looking for fundamental risk factors.

  5. Simple: higher risk, better reward. It all boils down to personal preference.