How much do you follow your stocks?

[zbigi]

I have a portfolio of "value" 43 stocks, i.e. companies whose numbers are at best expected to grow with inflation. They all pay decent or good/very good dividends. For people who have similar portfolios, my question is - how much do you know about your stocks, and how much do you follow them? It's probably best to express that in terms total hours invested in research, and perhaps also hours per year/quarter.

Right now, I'm approaching 10 hours of research for many of my stocks, which still feels like scratching the surface. I feel like, if I do it right, I'll essentially become a part-time investor, especially given the number of stocks. On the other hand, I could just yolo it, and assume that my portfolio size is large enough for law of large numbers to start kicking in (randomness from different stocks cancelling itself), and that I'll get results similar to the broad market, or at least "value" indices - assuming my exposure to sectors etc. is similar to that of the broad economy.

[2Birds1Stone]

VTI and chill.......0 hours per quarter.

[delay]

Once a quarter I sell five stocks and buy five new ones. I find a site that lists stocks (like Vanguard China fund) and select one randomly. This takes 4-8 hours a quarter.

Where do you find stocks to consider?

[Scott 2]

This question is one factor that kept me with indexing. I decided it was easier to save more and accept potential underperformance of my portfolio.

Even with a million dollars, an extra 1% yields only $10k. That doesn't leave much time for learning, execution and monitoring. And I'd rather do something else.

Similar to minimizing cash flow obligations, I want the same with my time. The less I can carry, the better.

[jacob]

[...] and assume that my portfolio size is large enough for law of large numbers to start kicking in (randomness from different stocks cancelling itself), and that I'll get results similar to the broad market, or at least "value" indices - assuming my exposure to sectors etc. is similar to that of the broad economy.

If you assume that your exposure, etc. are similar (the same, really), you don't have to assume that N=43 is "large enough". You can calculate the effect of adding more stocks from the Central Limit Theorem. The variation around the average of something like VTI ("infinite" portfolio) is effectively 1/sqrt(n)*NormalDist(0,stock variation).

So it goes with 1/sqrt(n).

You can think of that as a multiplier on your picks relative to the market. So for 43, it's 0.15 ... whereas for e.g. 250, it's 0.06 ... so if you keep adding more stocks to your portfolio, you'll effectively end up wasting your time. Of course, if you reduce the number, you better be better than average. However, this does give you some constraints on where to prioritize: more effort in fewer stocks or less effort in more.

[IlliniDave]

I check/record my account balances once a month, mostly because I have data going back a long way and am reticent to break the streak. I don't even consider that "following". Like a couple others here, I'm a buy/hold index-style investor. Like Scott 2 mentioned, not having to track and fret about things is a major appeal to the strategy.

[zbigi]

I'm also considering replacing my portfolio of stocks with a synthetic replication (swap-based) ETF. With synthetic ETFs, the dividends don't seem to get leaked (because the fund does not receive them in the first place), which was my main reason for not going the index ETF route. As fun as stock-picking can be, I'm not sure I want to have it as an ongoing worry in my life. Although in any case I'm glad I went through this exercise, because I've learned a lot about accounting, reading company fillings, assessing company's financial position etc.

[zbigi]

Ah, the sneaky European ETF providers had almost gotten me - they all use "Net TR" variants of indices as benchmarks for their ETFs, which makes their performance look very nice vs the benchmark (often even slightly outperforming the index). The trick is that, "Net TR" indices already assume (unreclaimable) tax withholding on the dividends paid out by companies.
For example, MSCI has both "Net TR" and "Gross TR" variants of their indices, and the example difference between Gross and Net TRs for their broad European index is 0.6%, and it's 0.8% for their Euro Value index (reflecting higher dividend yield). So, when I sum up that 0.6% money lost to foreign taxes with (let's say) 0.3% management fee, that's almost 1% lost every year. Assuming I'm expecting 2-3% average real returns, that's 30-50% of returns lost. Not a trivial amount.

EDIT: The iShares and UBS euro stock markets ETFs I've looked at outperform the "Net TR" benchmark by 0.1-0.2%, even after fees (I'm guessing they're able to do it via tax optimisations which are better than what the index creators have assumed). This means that the total handicap vs holding the shares manually is around 0.4%-0.5% for MSCI Europe, which is not terrible.

[Stasher]

I usually look every day or so lately with the geo-political roller coaster happening and curious watching the market react to the circus. Mostly though because I have an app on my phone for the self-brokerage company I use and it is easy to look. I'm not obsessed or overly wrapped up in it as I am invested in boring index funds, 3 of them being world equity, domestic home market equity and domestic home market bond.

[jacob]

As fun as stock-picking can be, I'm not sure I want to have it as an ongoing worry in my life.

Consider how your choice of strategy fits into https://en.wikipedia.org/wiki/Flow_(psy ... cteristics Having the skill to navigate a challenging market moves you from the e.g. anxiety/worry-zone over to the control/relaxation-zone.

Also consider that a lot of the chill index investors stop being so chill when the market stops acting like a high-yield savings account, especially if they no longer have an income to go along with the "buy the dip" chant. It's not a magically worry-free choice of strategy.

A lot of SWAN is in your mind. Ignorance is bliss until consequences bite.

[delay]

A lot of SWAN is in your mind. Ignorance is bliss until consequences bite.

SWAN = Sleep Well At Night ?

[jacob]

yes

[zbigi]

Consider how your choice of strategy fits into https://en.wikipedia.org/wiki/Flow_(psy ... cteristics Having the skill to navigate a challenging market moves you from the e.g. anxiety/worry-zone over to the control/relaxation-zone.

Also consider that a lot of the chill index investors stop being so chill when the market stops acting like a high-yield savings account, especially if they no longer have an income to go along with the "buy the dip" chant. It's not a magically worry-free choice of strategy.

A lot of SWAN is in your mind. Ignorance is bliss until consequences bite.

I don't expect the investments into stocks to be chill. Even holding an index fund is a small source of anxiety for me, given the how relatively expensive stocks are relative to how much they seem to be worth. On that note, I will be decreasing my overall stocks position from 37% to 25% of total portfolio, and holding the difference in something else until P/E ratios decrease, or until future prospects for companies start to look better.

On more general note, my two alternatives to ETF-based index investing are either outright active investing (trying to pick stocks which will outperform the index), or trying to replicate the index manually to avoid tax leakage.
First option requires making it basically my hobby, as the market is relatively efficient at pricing stocks, so getting an edge requires a lot of time investment. Martin Shkreli, whose videos I've been watching recently, recommends to only limit your investing to a single sector or even sub-sector if you don't want to be living and breathing stocks 24/7. This is of course not great if you want to build a retirement portfolio, as you'd be severely exposed to a sector-wide shock or decline, but it highlights what it takes to make truly informed (i.e. not much worse than the pros you're playing against) stock market picks.
Second option (manual index replication) allows me to save 0.5% a year, but leaves me with a different exposure than index funds, as I won't be able to fully replicate index fund's exposure. The different exposure may not be the worst, because who's to say which exposure is actually better? With the caveat that perhaps a portfolio consisting of stocks that are actually Europe's largest has at least proven to be resilient up to this point (as the stocks grew through whatever past circumstances threw at them), so, insofar as past can be some predictor of the future, their resilience to unknown adverse events may be bettter than than of my manually selected portfolio. Also, e.g. the MSCI Euro index represents around 85% of Europe's market cap (and thus the index should be correlated with Europe's GDP), whereas my mismatched picks represent ???.
BTW both options require a bunch of paperwork, including contacting tax authorities of half a dozen European countries on an ongoing basis in order to reclaim the dividend they withheld - or I forgo that, and the returns drop by around 0.2%-0.4% a year. Whereas in the ETF scenario that is not required (or, more precisely, not possible - the leakage is baked into ETF's returns).

EDIT: I forgot one thing. I would generally prefer to hold a distributing stocks ETF, as then you're less concerned with stock price variations, which are partially a function of monetary policy, changes in capital availability (e.g. due to demographics changes, as is often pointed out by Peter Zeihan), changes in sentiment etc. I like the idea of getting a part of company's free cash flow every year, regardless of what happens to the share price, and you can get that with a distributing ETF. Although, with an accumulating fund, you can simulate that by just selling the equivalent portion of your position (equivalent to the dividends received by the ETF) every quarter, to offset the fact the the fund just reinvests the dividends at current prices.

[IndexAndChill]

Only when I add money so every 3 months or so. I'm in a nice and chill global 60/40 all in one index portfolio. The results are the results, go with the flow. Hands off in my approach.