The trigger : a stock coach compared properties, gold, mutual fund,, and pointed out a unique advantage of stock as an asset class. I’m even luckier, due to Robinhood.

When buying small, the Impact of missing latest news is proportionally small.

— update

if you want to gradually develop a personal stock-picking “system”, then you need to make a large number of small but real decision, over different times. A few big trades won’t grow your confidence fast enough.

To become an experienced stock investor, you also need to make many informed decisions and learn from that experience.

Q: how much retrospective analysis needed?
A: not about how many hours but how much real traction you gain (not wheel-spinning). You should cut down the review when you notice diminishing return.

Quick learning is an advantage of stock vis-a-vis other investments.

— buy bigger .. When we have some confidence and experience then we can put in bigger trades up to $5k. Even at this level the impact of missing some news is not huge.

After you learn the art and grow in confidence, you may need to bet bigger, or ROTI remains low. But it’s not a harm in itself as explained below

Nevertheless, Low ROTI is no real problem for recreational investing.

— I always favor small trades below $1000, like $500. This way, we don’t need so much due diligence.
My learning comes after I hold the name in my portfolio and I get to monitor it in my portfolio, just as you monitor the stocks of you past employers, the stocks behind the brands you buy. A bitcoin researcher, an economist by profession, bought some coins just to motivate himself to monitor it.

This is a benefit of investing in individual stocks rather than ETF.

— downside of this “buy-small” advantage

• Low entry barrier means too many small retail investors … herd instinct
• low ROTI
• hard to find bargains

— Fractional shares are a great training tool, though there are some limitations.
— Buy without fear if below $50.
— Compared to mutual funds, PE etc, I feel ETF/REIT/Stocks support faster, safer learning curve.
You get to climb the curve faster thanks to the cushioned training outfit.
— mutual funds learning by small trades, as compared to ETF

• 🙁 annual fee
• 🙁 no limit order
• 🙁 you can’t learn by buying one share as in stocks

Both mufu and ETF offer

1. 🙂 less distraction at work
2. 🙂 pre-clearance exemption

— email to fellow investor Zeng
Q1: Is there anything harmful in buying very small quantities of a stock?
I don’t know any. I believe lower profit is not a harm in itself. Likewise, keeping money in time deposits is no harm.).

Q2: Is there anything harmful in buying “too many” stocks?
I don’t see any.

Q3: is it ok to buy-n-forget? Many people say “you need to monitor your portfolio once a while and have a plan when to sell”.

• I think it’s OK. Buffett once said something like ” Our Favorite Holding Period Is Forever“, so I think it’s entirely possible to make a decent profit with buy-n-forget.
• If I must babysit my positions, it would affect my sleep, my work, my mental energy for workouts, and parenting… all of them bigger than stocks. As busy fathers, we all understand that our total mental energy per day is a limited resource. I don’t think it’s worthwhile to spend my precious mental energy on babysitting my positions.

Q4: is it wiser, healthier to focus on a smaller number of (say 10) stocks or 100+ stocks? You gave a valid argument that since I can only allocate up to 10 minutes, and invest small amounts on each stock, I won’t make big gains.

• my stock picking is recreational, perhaps with $15-20k risk capital. Am not aiming for big gains[3]. For each stock XYZ, I’m OK with XYZ if over 10 years XYZ temporarily rises above my initial purchase price. “Temporary” so as to give me a chance to exit. Even if I exit with 2.2% return over 3 years, I’m fine.
• I have learned from experience that more time spent on analysis doesn’t lead to better trades. Sometimes I spend only 3 minutes on an unfamiliar stock, before buying. No major mistake so far. Some of the regrettable stocks were bought after longer due diligence.

[3] If you want big gains, just buy SP500. I do that too, but doing that is too boring and not recreational. (If some investors want to beat SP500, I wish them good luck.)

For my investment to remain recreational, it must not create undue stress. Therefore, diversification helps. Meaningful diversification is not easy, and my 100+ stocks represent a wide spectrum, with superficial diversification. Concentrating on 10 stocks would be even less diversified and more stressful.

Q5: Just what have I learned from so many stock-picking decisions? Here’s a random list of answers, half-ranked by unique/specific value

• I am learning how to read news, and I learned how much to trust analyst ratings. Now I know there is a validity period, a target price, and a rating in each analysis. I have very limited time and must zero in on the key points.
• I learned about various zero-commission brokers. Robinhood is a poster boy among them. There are many limitations to the platform. I learned many of those limitations.
• I learned a lot about how to assess dividend history and dividend safety. I also learned about share buy-backs.
• I am learning how to group my 100+ stock positions into categories… crucial for the purpose of benchmarking
• I learned about (sector) concentration risk within my portfolio.
• I learned about risks in REIT, utility/telecom, pharma, cars, oil majors, energy mid-streams, tourism/airline sector, banking/insurance, mining .. among other sectors.
• I learned a bit about Russia, India, Canada, Japan, China… Many of these stocks trade OTC .. low liquidity
• I learned some of the limitations of country-specific ETF or mutual fund. I pick my own stocks for exposure to specific geographies.
• I learned about withholding tax implications for Canadian (+other) stocks
• I learned that more time spent on analysis doesn’t lead to better trades, as explained earlier
• I learned about the risks of fractional shares vs big-quantum stocks (above $200/share), and also market- vs limit-orders
• I learned about emotions, impulsive trading, over-buying, obsessive trading, distractions from work…
• [v] I read about legendary investors’ styles including Buffett. They make mistakes too and they seldom can beat SP500.
• [v] I learned about why the U.S. index beat all regional market indices hands down.
• I am learning about blue chips vs small caps. Most people seem to favor large caps if they only buy a few names.
• I learned a bit about leveraged REITs. I think you need to invest in many REITs before you start seeing the differences in leverage.

[v=Note some of the things above can be learned without buying 100+ stocks (thought more trades would speed up learning). I have marked these items with v]