Thinking about quitting stock picking

I look at this way, and maybe it's because I'm young and bold (maybe stupid), but I'm willing to take big risks at this point because as I see it the overall reward of hitting it big on a stock greatly outweighs the potential loss. At this point in my life losing it all on a stock isn't gonna change my life, but hitting it big will change it greatly for the better.

I'm sure my outlook will change as I age.

Now that doesn't mean I'm throwing all of my money on penny stocks and whatnot, but the whole Boglehead philosophy of getting rich slowly in index funds doesn't resonate with me. You won't hit it big if you don't try, you only have one shot (yolo), and nobody's life changed by getting rich in 40 years, so why not go for it?

I'm sure I'll get ripped by the older folks on here, but that's pretty much my philosophy on life. You only get one shot at it, why not go all out?

I agree, and although I said all of that I still have a portion of my money in index funds. It would be dumb to completely ignore the power of compound interest and the relative consistency of big index funds over the long term.

But there is absolutely only one way to 100% guarantee you won't hit it big, and that is to not even try. IMO that's a much bigger risk than losing everything.

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So, the question for stock pickers is:

What percent is a typical stock of your total portfolio? If it's as small as me, how do you justify the work/reward?

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My largest holding is about 5% of my portfolio and is an example of why I still enjoy picking individual stocks. I had been wanting to add an MLP to my portfolio and decided to go with Kinder Morgan Management (KMR). I bought it in May for about 72 and learned in early August it was being merged into the parent company and that I would be receiving 2.5 shares for each share of KMR I own. I am now up 40% on this trade in about three months. I plan on holding KMR (will be KMI when deal closes) for at least 10 years and could easily see it doubling again, along with a dividend that is projected to grow at 10% a year starting in 2015. Obviously all of my trades don't go this well , but it feels good to know that I studied this trade and executed it perfectly.


I also enjoy trading options and currently have leaps for Ford and Bank of America that expire in 2016. I can always protect these positions or KMR with put options if things start going haywire in financial markets again.

As another poster stated, stock-picking is best when it is a hobby that is funded by money that you aren't counting on for retirement. The funds I use to trade actively are all from profits I made selling a rental property.

The money we need for retirement is all in index funds/bonds/cash and will continue to be invested in a way that is designed to grow slow and steady.

If/when I don't enjoy this hobby anymore I will liquidate my brokerage account and put it all in index funds.

hidden stops ?

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The problem I see with it is that when you're young, you don't have enough capital to buy enough shares to "hit it big" to begin with. Unless you risk all your savings money on those picks, hitting a 300% return on $10 isn't changing anything.

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Exactly so. Early career investors are much better off focusing their efforts on increasing their income at work so that they'll have more to invest as early as possible.

I'm not sure why people hate on AAPL. It has made me good money.

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What helps young people save is the power of compounding. Starting early - even with a low compounding rate - will drive huge benefits later in life.

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What really helps young people early on is a high savings rate on above average earnings and receiving a good company vested match. Compounding helps down the road.

I've got 16 individual holdings in taxable accounts. If I still had loss carry forwards I would sell 6 of them, but I don't feel like paying taxes on 6-figure gains + 6% state tax. My upper limit would be 5% of my portfolio value if it is something one would consider holding longer term, but 1% sounds like a lot of work for limited exposure. I suppose you could consider it your own fund, but buying an ETF or fund would be a lot less hassle.

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For instance, let's say a young person with a modest income hits a 5 bagger with 10 grand. Although they wouldn't be on lifestyles of the rich and famous, $50 grand in a short time span will greatly change the outlook of someones financial state.

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Do you know what the average starting salary is of a young professional? Where are they getting 10 grand to put down on one stock?

Hell, I don't even have 10 grand to risk on one stock and my household income is pretty substantial.

I have more or less quit -- the logic being that I suck at it. My returns are lower than playing the market.

It's the vanguard chronic indexing solution. I've slowly converted half my portfolio to this. I'll probably keep some of my best dividend yielding stocks and sell the remainder, dollar cost averaging in over time.

Just put say $200/day or week in the market and forget about it. Look at it again in 10 years.

bogleheads.org is a great forum for us indexers.