ETFs and index funds are all the rage right now. And for good reason.
They provide essentially the same results for a substantially cheaper price than mutual funds, and people are getting fed up with paying their banks for lackluster results.
I am all for that, you should be saving and investing your money where you can get the most out of it. In an age where the cost of living is ridiculously expensive, you just can’t be wasting up to one third of your portfolio in fees.
But I just can’t justify switching my portfolio over from an individual stock picking strategy to ETFs or index funds. Why?
There is more potential in individual stock analysis
This is pretty cut and dry. You’re never going to pick lets say, a marketing tracking ETF and get it to nab you a ten bagger in 5 years.
With individual stocks, the potential is definitely there, and that is why I just can’t seem to make the transition.
I’ve purchased two stocks over the last 8 months through thorough analysis and am now sitting on 300 percent in gains on those two stocks. If you’re curious, the stocks are SHOP.TO and WEED.TO.
My portfolio contains over 20 individual stocks. The two biggest holdings in my portfolio were Shopify and Canopy Growth. Why?
Because I knew they had a high potential for growth, and now my portfolio is literally years ahead of someone who tried to focus on an ETF or index fund strategy.
Individual stock picking isn’t without risk, I know this
Now, you may say I got lucky with those two picks. But I can tell you right now they were carefully analyzed and deemed more than likely to go up rather than down.
As a former professional poker player, I can tell you this:
You will not be right every time, you just need to be right more times than you are wrong.
You can establish a strong edge as they like to call it in poker. As long as you dont place all your eggs in one basket and minimize your losses, taking the position that provides you with an edge will in the long run deem to be profitable, regardless of the actual results at the present time.
Nabbing these large returns can add up exponentially for when you move your portfolio to a more passive approach in retirement
I advocate individual stock picking over ETFs and Index Funds. But, at a later age or stage of your career, I definitely would advise to move towards a more passive approach to investing.
This could be done via Index Funds, ETFs, or even bonds. But you want to maximize the amount that is in your portfolio at an early age so that you’re better prepared to retire, or even retire early.
To do so you have to take risk, and individually picking smart growth stocks can get you there.
Note the bolded. I’m not advocating you go out and invest 50 percent of your portfolio on some hot penny stock. That’s not the way to go about things.
Intelligent,careful and well thought out investments in high potential growth stocks is the best way to accelerate your portfolio.
Who did I learn all this from?
Well, I can sum it up by saying I’ve read a ton of Peter Lynch books. He had a huge influence on my investment mentality and it’s paying dividends early on in my investing career.
You’re gonna lose some investments you thought were for sure winners. You’re also going to strike oil where you thought the well was completely dry.
The fact is, at a young age a certain amount of your portfolio has to be dedicated to making educated decisions on riskier stocks. For me the magic number was 30 percent. I own 3 stocks I would determine to be speculative growth stocks. SHOP.TO,WEED.TO and PKI.TO.
It all depends on your risk tolerance
I understand some people can’t stomach even marginal risk. Its your money and you’ve worked hard for it. As long as your money is earning something you’re doing it right.
There’s also this. If you don’t know what you’re doing in terms of picking high potential growth stocks, you may as well just head to the casino and play Roulette instead of attempting to purchase them.
I’ve developed a growth stock analysis guide on Stocktrades, and you can head there and sign up to receive it if you wish. Its a 5 part guide developed by us free to you, and it will show you how to navigate through these stocks.
Good luck, and here’s to your next ten bagger!