Index fund vs individual stock, dividend
I picked these dividend paying stocks, not for academic study, not with the intention to criticize stock picking,not to promote de-diversification. to the contrary, I do believe picking stocks could be very rewarding(also can be extremely risky), and I acknowledge the fact that a well diversified portfolio is the way to go, for most investors.
These are all very solid business with very reasonable price, or in other words, they were all fairly valued back in 2009. Any investor positioned into these equities, should have a pretty good return today. An investor holding these individuals stocks until today, are generally very confident investors.
This thread is started with the intention to serve as an eye opener, for amateur investors, or someone with no knowledge of investment at all, just like what I was before, the purpose of this thread is to alert them to avoid costly mistakes, with our hard earned money.
Given above statement, it's very revealing and interesting to make an amateur comparison against all known s&p index, in the same time frame.
take 2009 Jan 2nd start, up to now
S&P, around 931 up to 2990, return 321% minimum, not bad for 10 years
ko, around 22 up to 52, return 236%, ok less than index
ibm, around 87 to 141, return 162%, ok, a lot less than index
td bank around 22 to 77, return 350%, better
mcd, around 58 to 211, return 360%, better
jpm, around 31 to 113, return 364%, better
even compared with the best return JPM here of 364% return, the index return of 321% return is pretty impressive.
on the other hand, solid stocks like Ko and IBM are performing very bad, much below the index.
Index fund is more than vegan
Dividend growth is great, good example is our Canadian CP, very good return! over 700% and still trading at 23 PE ratio, paying a modest dividend.
However dividend by itself is not good in investment, growth in share price is always more important, it's an indicator of a healthy business.
There are proven dividend growth index fund too, very diversified and solid performance with proven and reputable management, vanguard had it, some other investment dealers also have it. For the safety of your hard earned money, choose very carefully.
It's indisputable conclusion by all investment professionals, that well diversified index fund is much less risky than individual stocks, given the above comparison, I encourage everyone reading this thread think rationally.
Ask yourself, can you always pick a well managed business for investing? IBM and KO are all very well managed, they were both beaten by the index.
What if you bought a bad stock, innocently thinking it's a great deal, an excellent business.
What if you exited a great position like CP at a bad timing, lost money or making peanuts? And watching its price steadily rise and rise ever since?
Jumping in and out can be very costly. Is always a bad idea, good investment strategy doesn't need shuffling your stocks frequently.
I didn't say it, Buffet said that, long term is the way to go.