Are individual stocks really bad?
So I have been investing for a few years now in a ROTH IRA with a long term DRIP strategy. I only have four stocks in my portfolio and I try to put max the $5500 every year. I know I am overweight in some areas and not completely diversified, but I am wondering if I have a good or bad strategy going on? I am in my mid 20s and plan on holding and reinvesting dividends until I retire. I also do plan on adding more every year and buying other blue chip dividend stocks. Are mutual funds a better way to go though? Could I have a combination of stocks and funds and focus on only buying mutual funds in the future? I have about $15,500 total in my ROTH IRA with the following breakdown: 36% Apple. 31% Disney. 17% 3M. 16% Starbux.
Hi, I'm another newbie here
How did you choose the stocks? It seems from your portfolio like you have bought shares in the companies, because you like those brands (which is still better then not having any investment at all). In this case I think you'll be better off if you add mutual funds. Also consider investing in your financial education, not necessarily money, but your time for sure. The better your understand the market the better your investments perfom
The problem, I'm going to guess, with what you are doing is...fees. Look at how much you are being charged each time you add to your positions...then calculate how much the stock would have to move to get that back to break even.
There are better ways.
And your entire portfolio is basically a SPY mini index but carries huge individual stock risk. You would have a lot less risk and enough capital to spread it around just selling wide options spreads waaaay out of the money.
If it were me I would just use around 1k in buying power per spread and sell premium in SPY, TLT, GLD, USO...as far out of the money as I could and still collect enough premium to make it worth doing...at least at around a 16 Delta on the short strike with around 45 days to expiration. Just doing that would greatly reduce my exposure and greatly increase my probability of profit...and only cost 6$ per spread (round trip) once every 45 days.
Or do it in the positions you have if I were very attached to them. Your risk would look very different and your fees wouldn't be eating you up. And I would do it with less than 1/2 the capital you are using....leaving some on the sidelines for new opportunities.