Quote:
Originally Posted by DoubleF
I might get laughed at for this opinion in this thread again... I understand risk aversion, but I think it's insane people will have personal portolios in excess of $5K that are essentially purely mutual funds or term deposits. I understand these are useful more in companies and corporations that are hoping to fight inflation and cannot risk losing principal... but from a personal standpoint, there's no reason why anyone with more than $5K shouldn't at least consider a small amount in stocks.
I always suggest learning on Canadian bank stocks. They're easy to understand from a business point of view and they give a dividend that's generally much better than a savings account or mutual fund and they're traded so frequently in high volumes that it's super easy to cash out on a whim if you need the cash. I'm not saying convert the whole thing. I'm saying buy 1-2 Canadian banks at $1K a pop and monitor it over a year. If your bank stock tanks, there are way worse issues in general than you losing a significant percentage in your stock. In general, as long as you hold the bank stocks super long term, these stocks will continue to trend upwards long term and they're easy coach potato stocks you can adjust for just by looking at the front page of the newspaper for the most major events that will significantly affect the short term prices.
Having other stocks is definitely more fun with the boom and bust and I've swung some serious home runs... but sometimes I look at some of the quirky and stagnant things in my portfolio and wonder why I didn't just load up on a bank stock and collect dividends for 5 years and collect a respectable but not amazing capital gain after that long duration.
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It's not that I completely disagree, because I generally agree. But the thing is $1k doesn't really give you much of a position.
The other thing is that portfolio construction matters. Everything from diversity and risk management to pure asset allocation are important factors and buying one or two stocks doesn't give you much in that regard.