My transition from being an active stock-picker to investing in low-cost index ETFs is mostly complete, and I’d have to say that it has been a relief. While I enjoy thinking about investing topics, having to track a basket of stocks can be a chore when I’d rather be doing something else.
I used to own between 10 and 20 individual stocks at any one time, and it takes time to keep up with them. For many investors, “keeping up with stocks” means watching their prices. However, to have any hope of success, stock pickers have to do much more than just stare at price graphs. They need to read company information and try to sniff out signs of changes in the odds of future company success. And they have to do this better than other investors.
To reduce my burden I could have tried to find a financial advisor and hand over my money, but then I'd be left worrying whether I’d chosen the right advisor. Overall, I expect better performance from indexing than from an advisor because of the lower fees.
I haven’t completely sworn off individual stocks, though. I still own some Bank of Montreal (BMO) and Berkshire Hathaway (BRK). (Disclaimer: I do not recommend any particular individual investments. Buyer beware.) I'm hoping that tracking just two companies will be manageable and enjoyable. They also represent only a small fraction of my portfolio and are quite stable companies (not that that is any guarantee: think Nortel). I may yet decide to eliminate individual stocks altogether.
I don’t consider these two stocks to represent “play money”. I don’t believe in wasting a fraction of my money on poor investments. If I didn’t believe that these two companies would perform well, I’d sell them.
I’m looking forward to simpler income tax returns and the knowledge that my returns will roughly match the widely-reported stock indexes whether I watch my investments or ignore them.