I recently read a very interesting discussion and series of comments on $2M blog regarding his individual equity investments.
Ultimately drops in his equity investments (outside of retirement accounts), which he sought to grow through DRIPs and Shareholder (which is a brokerage that acts like a DRIP program), seriously diminished his overall increase in net worth for 2005. In his words, he would have done better putting the money under a mattrass.
I think the challenges he's facing are common to all of us. Individual equity investments are very challenging unless you have:
- enough money to buy in larger quantities - this reduces the % cost of commissions
- enough money to diversify your holdings into many different equities in different sectors - this reduces your risk
- enough time to research your investments and follow them
- enough patience to buy and hold versus trade frequently
- sufficient non-equity asset classes to have a broader level of diversification
- enough time to allow long term trends to overcome short term dips in the market (10+ years)
With the above concerns in mind, I replied to his posting and to the comments of others. You might enjoy reading it.
This was my major point: