Individual Stock Purchases vs. ETF’s/Funds

Here me out…

A lot of you tout VOO, SPY, etc. I get it and don’t disagree with the logic at all. And the numbers speak for themselves.

However, I’ve been burned a few times on “the funds” and in general just never been thrilled with the performance in comparison with individual stock ownership. There always seems to be a hole between the market and the fund performance (managers getting rich). I also can’t help but see that the wealthiest of investors always own their stocks directly (except for a handful of obscure market sectors warranting ETF’s/ funds). Wealthy investors have more money of course, I get that. And ETF’s/funds/Robinhood type investments are designed to let everyone invest in a larger pool.

I can’t even begin with the scam that is Robinhood. As far as the more legit investments such as S&P 500 ETF’s/funds, I can’t help but feel like those are still a little scammy, aren’t they?

I mean… The portfolios on all of those funds are LITERALLY identical across the board. They LITERALLY purchase the S&P 500 at the same %’s as the corresponding market share %’s. All of which is public information and computer automated, not a group of people working tirelessly to make brilliant investment decisions. Between VOO & SPY alone (I didn’t have time to dig into the many others), those 2 funds rack up well over $400 Million in management fees/expenses per year.

I get that diversification costs money and at the cost of 1 share, you can own a piece of 500+ companies. The concept is remarkable, but $400 million in expenses is a little crazy right? These aren’t the wealthiest investors paying this mind you, this is designed for people who can’t afford that luxury.

So here are 2 facts I thought I’d throw out there…

1. Out of the 500ish stocks on the S&P 500, only 45 stocks make up 50% of the portfolio for all of these S&P 500 ETFs/index funds.

2. If you were to purchase one share of each of the top 45 stocks today, it would only cost $8,510.

This past week I’ve started to buy stocks one share at a time. Its nerve racking right now not knowing the bottom of the market. And we are not privy to a lot of information that would clue us in. Not knowing if this is the best time to buy or if the market is going to tank even further (which is likely). We all want to buy stocks that will survive any short-term fluctuation. So I decided to buy 1 share of each stock that I perceive to be a ‘survivor’ and currently at a sale price. When I looked at the stocks popping up on my list, low and behold they largely mirror the S&P 500 to a T. Which initiated the rabbit hole I went down in computing these facts…

This is a new strategy I’m implementing so I obviously can’t post any results. But I thought I’d share my thought process since synergy > individual ideas.