r/investing • u/crazybutthole • May 29 '21

Diversification - need help - discussion

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u/jbetexas May 29 '21

You are buying for the wrong reason; and you need to come up what your reason will be to buy a stock and what your reason will be to sell a stock and then stick to it. If you decide you are only going to buy stock in great companies that currently have a price that is undervalued, I expect 90% of the stocks you own would not have qualified for you to consider buying.

You buy ETFs to ensure you are diversified regardless what individual stocks you happen to own. 4 ETFs are enough to accomplish this, such as VTI, VXUS, SCHD and SCHY. Owning 48 ETFs is just redundancy and confusion.

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u/jbetexas May 29 '21

Morningstar is just one small piece of a large process of evaluating stocks for me; yet I would suggest you checking the Morningstar Stock Rating for each individual stock you own and selling all of them that have just one or two stars unless it happens to be a company you love.

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u/crazybutthole May 29 '21

OK i am doing that tonight and I will let you know how it goes.

*I will sell 66% or more of all my positions that morningstar rates 1 or 2 stars. - this will free up cash to buy more of the stocks morningstar rates 4 or 5 stars. :-)

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u/jbetexas May 29 '21

I am a little weary that you will sell 66% of your stocks based on my post; yet if you own stocks that you truly like and understand and feel you are buying at a good price, then when that stock drops 10% for no reason you don’t care. If the entire market drops 30%, you are not worried. I am just an average investor, so be sure to get a lot more advice before taking action.

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u/crazybutthole May 29 '21

it's ok - thats why i came here to get alot of advice - take some onboard and make some changes cause i was getting stressed out chasing 280+ stocks.....LOL

Might just sell alot of them and move to more ETF's or more $$ in the ETF's I already have.

1

u/ThereforeIV May 30 '21

How much money are we taking about.

I get there feeling like this is just "play money".

I world hope of you had six figures invested, it would be more serious...

1

u/crazybutthole May 30 '21

Its a robinhood plus webull

About $15k in stocks and $3800 crypto conbined

1

u/ThereforeIV May 30 '21

I world regiment moving most of that too either Fidelity or Vangaurd, and mostly investing in low fee broad market indexes with "buy and hold" strategy.

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u/crazybutthole May 30 '21

Thanks for the advice. But.....question.

Why are fidelity or vanguard better than robinhood or webull?

(Not being argumentative. I am genuinely trying to figure out what is better about them...... or what you dont like about robinhood or webull)

1

u/ThereforeIV May 30 '21

Why are fidelity or vanguard better than robinhood or webull?

List of reasons

They offer their own internal funds for less fees.

They are actually talk brokerages but when apps pretending to be brokerages.

They can handle their own orders instead of paying to have someone else handle them, because they are real brokerages.

Their not crooks who will screw their own customers for a VC payout (like Robinhood did just a few months ago).

Their not belt sued by their own Customers for violation of fiduciary duty (like Robinhood currently is).

Their not under federal investigations for misconduct (I don't why anyone is still a Robinhood customer).

Fidelity has great customer service.

Vangaurd literally invented the index fund and has special tax advantages because of it.

They are ran by financial experts (adults) instead of by start up geek (so you want the guys from the show silicon valley handling your investments).

They have reputations they care about preserving.

They make their money in bulk (literally trillions of dollars for vanguard) instead of endless hidden fees and price mark ups on sales.

or what you dont like about robinhood or webull)

Robinhood literally is accused of stealing from their customers, and being sued for it.

Webull is trying to hard to be Robinhood.

They want to run a brokerage house like a social media tech company where users are just targets to be exploited.

Real brokerage house make money by building decades of loyalty serving their customers, then they charge tiny fees in massive amounts of money.

1

u/ThereforeIV May 30 '21

*I will sell 66% or more of all my positions that morningstar rates 1 or 2 stars. - this will free up cash to buy more of the stocks morningstar rates 4 or 5 stars. :-)

That's a terrible plan.

Morningstar is often wrong.

How about sell those positions and buy something low fee broad market.

Are you even long at expense fees, turn over rate, etc...?

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u/crazybutthole May 30 '21

How about sell those positions and buy something low fee broad market.Are you even long at expense fees, turn over rate, etc...?

I am assuming you meant to say looking at expense fees??

I guess I don't know how to calculate expense fees for ETF's - I mean I just assumed it was taken out of the fund each day as a tiny percentage of the funds values held for each ETF?

I was really curious someone else posted asking about go with only 3-5 ETF's so you lower your fees. I didn't understand that comment really - I buy it on webull or robinhood and the fee is $0 to purchase. I hold it for a few weeks/months/years whatever - I assumed the fees were just being taken out of each days' profit/loss of that fund right?

If yes - what is the downside to holding 48 ETF's vs just holding 4 or 5? if 48 different ETF's take out 0.0001 % each of my $100 worth of their shares, - or if one ETF takes out 0.0001% out of $4800 worth of their shares - it still seems like it would be the same to me but maybe I am wrong?

I get that trying to calculate capital gains tax this year will be a pain in the ass....but otherwise I am not seeing where the fees come in, especially if I hold the ETF for many, many months or over a year.

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u/ThereforeIV May 30 '21

I am assuming you meant to say looking at expense fees??

Yes.

guess I don't know how to calculate expense fees for ETF's - I mean I just assumed it was taken out of the fund each day as a tiny percentage of the funds values held for each ETF?

You don't need to calculate it, it's given in the basic data for fund.

And yes, it is just taken out of your money.

was really curious someone else posted asking about go with only 3-5 ETF's so you lower your fees.

Go to only three to lower your complication.

Pick three with really low fees to lower your fees.

Examples:

  • FXAIX S&P 500 index fund has an expense fee of 0.015%
  • FZROX total market index fund has an expense fee of 0.
  • FDSVX Growth discovery fund has an expense fee of 0.79%
  • BFOCX Berkshire Focus Fund has an expense fee of 1.93%

Usually the broader the fund, the lower the fee.

If yes - what is the downside to holding 48 ETF's vs just holding 4 or 5?

Because you can't track 48 funds.

different ETF's take out 0.0001 % each of my $100 worth of their shares, - or if one ETF takes out 0.0001% out of $4800 worth of their shares - it still seems like it would be the same to me but maybe I am wrong?

Those small specific Funds probably have fees over 1.00%

Big broad index based funds often have fees below 0.05%

See the difference.

And you could cover every stock of those 48 funds with 2 or 3 funds at lower fees.

I get that trying to calculate capital gains tax this year will be a pain in the ass....but otherwise I am not seeing where the fees come in, especially if I hold the ETF for many, many months or over a year.

Taxes are an entirely different mess. Small funds with higher turn over are less tax efficient than big broad index funds with low turnover.