I use a sector based portfolio of individual stocks for the bulk of the large cap domestic portion of my larger clients’ portfolios.  This portfolio almost perfectly follows one of the portfolios that ML research puts out.  I then add stop orders or covered calls when appropriate.<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Do you really think that as a new broker that you can pick a better portfolio than a seasoned mutual fund portfolio manager?  When will you be leaving yourself time to go out and gather new assets?

--WM

Thanks for the quick response. No, theres no way I could pick better stocks than a mutual fund manager. Obviously, for brokerage non-ret. accounts that the client specifically wants to speculate it's ok but for the traditional SAM/brokerage-Ret. acocunt I now see why mutual funds are more appropriate.

wow… that was a quick realization, I can’t even imagine how many prospects will end up taking you to school. This industry needs more regulation to stop dangerous guys that don’t understand fundamentals, this is like 101 stuff I surprised the question was even posted by someone that has their s7.

The only time it seems to make sense to use individual stocks is if you can buy enough different stocks to avoid over-concentration or at least minimize non-systemic risks.

Not to mention that you’d have to call your clients for each stock you buy or sell in a wrap account.  Would you want to have these conversations all the time?

MF’s may be boring but the diversification can’t be beat with individual stocks.  If your client has enough money to sink into that many stocks, make sure they’re rooted in some MF’s… you’ll thank yourself later.

so you guys don’t think someone can have a diversified portfolio with, say, 10-15 different stocks and 5-10 etf’s?  i am speaking of a nq account here where taxes matter.  just curious, not saying it is so.

I rarely use use mutual funds. I’m sure your firm will have a focus list of stocks they recomend. If you client has less than half a million you may consider UIT’s. If they only have 100K or less you dont have much choice.

 i think you can distinguish yourself from 90% of reps by building individual stock portfolios for clients. look at martin shirnoff at lehman bros.

Once again, we stand united.  

If your main objective is to avoid any strategy that is “bland or boring” or one that helps you “stand out” from other advisors, picking individual stocks is certainly a good way to achieve your objective, especially as a new FA.

If, however, your objective is to actually help your clients invest prudently towards THEIR long term objectives, a new FA has zero business picking individual stocks.  You don’t even know what you don’t know yet.

Start with this premise: this isn’t about you.  It’s about the client.  Learn on your own nickel, not other people’s.

“a new FA has zero business picking individual stocks.  You don’t even know what you don’t know yet.”

Gaddock,

Read this post again and tell me this new FA has any business trying to pick stocks for clients:

I’m a relatively new broker with LPL (7, 63, 65 and working on my 24)
and was wondering about stock picking. I’ve noticed almost all FAs
use Mutual Funds to build client portfolios but stocks are my absolute
passion. Is just picking good stocks for porfolios too risky now
compared to MF selection? Does anyone still use just stocks for a
portfolio construction? However, I do know that the possibility of
arbitration is a lot higher with equities compared to MFs but I
honestely have to say MFs are so bland & boring…but, then again,
you are getting a quarterly commission from the MFs.

That statement tells me everything I need to know to repeat that he has no business being paid to pick stocks.  Period.

As for your strategy that has ‘stomped’ the majority of mutual funds - that certainly is quite a claim to make, but much harder to substantiate.  What are your returns YTD, 1yr, 3 yr, 5yr, 10 yr?  MPT stats?  Benchmark?  Exactly what percentage of funds did you stomp?

That statement may very well say that…singular

[quote=Gaddock]That statement may very well say that…singular

Assuming you are passionate about stocks, I think it’s a good idea to have 10 to 20 large cap stocks you believe you can hold for a long period of time. Put together a file of those companies and keep an eye on them.
You can talk about them to prospects and use them in portfolios when your clients need large caps and feel comfotable with stocks. I would use funds or ETFs for the small or mid-caps.
I’m pretty sure anybody on this board could put together a blue chip portfolio that will do fairly well.
Just my opinion, but I think individual stocks have tax advantages, cost advantages, and are stickier than mutual funds. You can call a client and discuss a dividend increase or an earning report in a way that you really can’t do with a mutual fund. I’ve ACAT-ed mutual funds, but rarely stock accounts.

Stocking picking sounds like elves running around at Christmas stealing from mantle decorations.

morp,

Gad,

It’s hardly a pissing match to point out that there is an important difference between shorting being something that all mutual funds “can’t do” and something that the “vast majority” can’t do.  Some clearly can and do.  That’s just a fact, and a pretty important one.  I think some folks here might like to be aware of that, if they weren’t previously.  Apparently you’re not one of them.  That’s fine with me.

I’m glad you’re doing well for your clients using whatever approach you choose, Gad.  May it ever be so.