West Loop Financial LLCWhy Buy Individual Stocks? – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 Why Buy Individual Stocks? https://www.westloopfinancial.com/2015/01/19/buy-individual-stocks/ https://www.westloopfinancial.com/2015/01/19/buy-individual-stocks/#respond Mon, 19 Jan 2015 09:00:25 +0000 http://evolvemypractice.com/?p=1622 Individual stock ownership provides both the hope of great returns (for example, if you were to early on discover the next Google) as well as the potential for disastrous results (you could end up with a significant holding in the next Lehman Brothers). But because investors are not rewarded by the markets with higher expected...

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]]> Individual stock ownership provides both the hope of great returns (for example, if you were to early on discover the next Google) as well as the potential for disastrous results (you could end up with a significant holding in the next Lehman Brothers).

But because investors are not rewarded by the markets with higher expected returns for taking uncompensated risk—risk that is easily diversified away—the rational strategy is not to buy individual stocks.

Unfortunately, the evidence indicates that the average investor, while nominally risk averse, doesn’t tend to act that way. In fact, individual investors often fail to properly diversify. That is the triumph of hope over wisdom and experience.

Read the rest of the article on ETF.com.

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