What does Dave have against investing in single stocks?
Looking back at the last 78 years, the performance of the stock market as a whole has averaged near 12 percent annually; yet the average return of the single stock investor is closer to 7 percent annually. Mutual funds typically hold 50 to 250 stocks in their portfolio. They hire mathematical geniuses to determine exactly how long to hold them and when to sell them to maximize returns. The average investor is simply not going to compete with the brains of most mutual funds, long term. Also, if you place much of your nest egg with one or two single stocks, your risk skyrockets. Thirdly, your sleep will be much less restful when your nest egg stock doesn’t meet earnings, sees it’s CEO locked up for fraud, or takes a 35 percent plunge because the analysts decided your stock is a hold instead of a strong buy. If you must satisfy your need to test your brother in law’s hot stock tip, Dave strongly suggests limiting this to no more than 10 percent of your portfolio. NOTE: By the time you get
