It’s time to drive your portfolio

To understand why now is the time to start driving your portfolio we need to take a historical detour. The current environment is the most investor-friendly and democratized that investors have seen. This brief history will outline how we got here.

Roaring 1920s

The birth of the individual investor, in the United States, can be traced back to the roaring 1920s. Investment speculation ran roughshod over the United States. The regular person found it hard to participate in the investing mania.  Regular folks found it hard to buy shares of companies mostly because they had to buy securities in round lots (round lot being 100 shares). Buying less than a round lot was prohibitively expensive until the 1970s. This fact locked the average investor out of purchasing individual securities. This era (1920s to 1930s) of expensive entry into investing ushered in the birth of pooled investment products – mutual funds.

Very simply, a mutual fund pools together multiple investor money and invests the pool into a portfolio of securities. The pool of securities is then managed by a person or team and you (the investor) own shares in the fund. Both mutual funds and exchange-traded funds ETFs) operate in this manner. There are a number of problems for investors (both professional and non-professional) who use pooled investments:

  • Little understanding of what you own
  • No control of specific companies you own
  • If using index tracking funds, you likely own profitable and unprofitable businesses
  • Overall portfolio performance can be watered down
  • Pooled investment fees (which are made worse on top of an advisors’ fees if applicable)

1975 and the discount broker

In 1975 the US Securities and Exchange Commission deregulated the securities industry.  This deregulation allowed securities brokers to charge any fees. This is where discount brokers entered the market allowing investors to buy and sell stocks for reduced commissions. As well, the requirement of transacting in round lots diminished. So, folks could buy less than 100 shares but paid handsome commissions to do so.

Zero commissions

It took 100 years, but in 2019 investing became democratized with the elimination of trading commissions. But, the pooled investments that were born out of necessity 100 years ago became embedded as the investment vehicle of choice for both paid advisors and regular folks alike.

Time to start driving

Since 2019, few reasons exist for one to resist managing their own portfolio. Today, you have immediate access to your accounts to trade via the internet. Costs to trade are zero. So, the only large hurdles you have is knowing what to own and how much of it. Through our subscription service, you will be armed with the missing links – knowledge and timing.

So, what are you waiting for? We provide the knowledge and you provide the effort to place the trades in a timely manner.

In our next post, Building a portfolio of quality stocks we will give you a small glimpse at how we put together our portfolios.

This website and associated newsletter along with its content/links are not financial advice. Nothing in this newsletter is an investment recommendation. All content is created for entertainment, educational, or informational purposes only. My strong buy, accumulate, hold, reduce or sell opinions are exactly that – opinions. Be sure to do your own research for your own particular circumstances or higher a professional advisor.

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