Investing in individual stocks

An experimental Portfolio

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Most investors today know about the advantages of investing in index funds. These funds tend to have lower expenses than actively managed mutual funds and they are often more tax efficient. But perhaps more importantly, they beat the returns of most actively managed funds!

However, some investors chose to invest a portion of their portfolio in individual stocks. This may be for one of several reasons:

  • To own a concentrated position in companies they strongly believe in.
  • Reduce their investing fees (since you don’t pay an annual management fee on individual stocks).
  • To attempt to beat the market.
  • For the fun of researching companies and attempting to find winning stocks.

The stocks listed below are part of a hypothetical portfolio (although I will be primarily selecting companies among stocks that are already in my portfolio, as they are companies I know the most about). The goal is to come up with a list of stocks that will beat the market over the long run. Some of my existing accounts have been beating the market for a number of years and I want to see if I can reproduce a market-beating hypothetical portfolio by selecting a new stock on the first and third Friday of every month.

DateTickerStockPrice paidReturnS&P 500Difference
7/2/2020*SQSquare Inc$113.390.00%0.00%0.00%
6/19/2020DOCUDocuSign Inc$161.4218.32%0.65%17.67%
6/5/2020WMWaste Management$112.20-6.44%-2.32%-4.13%
Average Return5.94%-0.84%6.77%

Last updated on 7/2/2020. The VOO (Vanguard 500 Index Fund) is used to track the performance of the S&P 500 in the above table. The Price paid column will be adjusted to account for stock splits if needed.

Methodology

The above chart will be updated at least twice a month to keep track of the performance of the selected stocks and compare it to the S&P 500’s performance (as measured by the VOO). My goal is to add mostly well-known companies to this list but I will occasionally add newer or smaller companies that are not household names (yet). I will be following a buy and hold approach. The idea is to only sell a stock if there is a good reason to do so. As a long-term investor, I am not particularly worried about short-term fluctuation and I understand that it might take a while for these stocks to outperform the S&P (assuming that they ever will).

*7/2/2020: added the new stock on Thursday since the market was closed on Friday (4th of July).

Disclosure: I own shares of Waste Management, DocuSign, and Square. I wrote this article myself and it expresses my own opinions. I am not receiving compensation for this article and I have no business relationship with any company/stock mentioned above.

Disclaimer: This is not an investment newsletter and Inveduco LLC does NOT recommend any of the above stocks. Investing in individual stocks can lead to the loss of principal and may not be appropriate in your situation. Some of the companies mentioned above are high growth companies and are extremely risky investments. Always consult with a financial advisor and do your research prior to investing in any security. The author and Inveduco LLC take no responsibility for losses due to investing in any stocks mentioned in this article. Read our full disclaimer.

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