By: Matt @ Home & Pocket
June 6, 2025
My investment strategy is often met with much skepticism and criticism for its overly complex and “high-risk” approach. I am often asked why I don’t simply buy Mutual or Index Funds instead of buying into individual stocks. People often cite their higher return on investments (ROI) or their fund DIVERSIFICATION as reasons. The simple answer for me is always – because,
“I like the idea of choosing & owning individual stocks”
It really is that simple for me. I believe the idea, concept, or belief behind companies being “public” and the ability to own shares of a company makes you a part-owner.
I feel connected to that concept. I like to pick and choose which companies I buy. I decide how many shares of each company I hold and when.
To me, is all about the experience and understanding of where your money is and how it’s being invested.
The best example I can give to further explain my position would be to use automatic vs. manual cars. that is a topic that some people will argue until blue in the face.
if you drive a manual you don’t seem to understand people who drive automatics – reverse.
Investing in the financial markets can be an overwhelming experience for beginners.
With various investment options available, it’s important to understand the key differences between stocks, mutual funds, and index funds.
Each of these investment vehicles has its own set of characteristics, advantages, and drawbacks.
In this blog post, we’ll break down the differences between stocks, mutual funds, and Index funds.
Our goal is to help you make informed investment decisions not just get you on my side!
However, I will also give you my side and reasons for only investing in individual stocks.
Stocks: Ownership in a Company
When you buy a stock, you’re purchasing a small ownership stake in a specific company.
Stocks represent equity in a business, and their value is tied to the company’s performance and prospects.
Investors who buy stocks hope that the company will grow and generate profits.
This growth can lead to an increase in the stock price. It may also result in dividend payouts.
Check out “A Brief History off the Stock Market”
Key Characteristics of Stocks:
- Ownership: You become a partial owner of the company.
- Risk and Return: Stocks are generally more volatile than mutual funds or ETFs. They can experience large price swings based on company performance, market conditions, and investor sentiment.
- Dividends: Some companies pay dividends to stockholders, providing a potential income stream.
- Liquidity: Stocks are highly liquid, meaning you can buy and sell them on the stock exchange at any time during market hours.
Pros of Stocks:
- High potential for growth, especially if the company performs well.
- Ability to vote on key corporate decisions (for some stocks).
- Opportunity to receive dividends.
Cons of Stocks:
- High risk due to market volatility and company-specific issues.
- Requires research and monitoring to pick individual stocks.
FUNDS: Mutual & Index
Since grade school everybody has heard of both. Mutual funds and index funds are often the go-to options pitched to everyday investors who want an easy way to “get in the market.”
Mutual funds are typically actively managed, which means a team of well-paid professionals is constantly buying and selling assets trying to beat the market. Sounds impressive, right? Except most of them don’t.
After accounting for the fees—often north of 1%—many mutual funds underperform the very benchmarks they’re trying to beat.
Check out a more direct read here: Mutual Funds vs. Index Funds: Key Differences Explained
Still, they appeal to investors who want diversification, automatic management, and don’t mind paying extra for what’s essentially a bet on someone else’s stock-picking ability.
Index funds take a more humble approach. Instead of trying to outsmart the market, they track it.
Whether it’s the S&P 500, the NASDAQ, or even the total stock market, these funds offer wide exposure with razor-thin fees (often under 0.10%).
They’re efficient, low-maintenance, and surprisingly hard to beat over the long term. But they’re also hands-off—you don’t get a say in what’s inside. You’ll own the winners.
However, you’ll also hold every bloated corporate dinosaur. You’ll also be stuck with every ESG-friendly underperformer the index committee decided to include.
So while they’re great for “set it and forget it” investors, they’re not for those who want control, customization, or outperformance.
Mutual Funds vs. Index Funds: A Quick Comparison
| Feature | Mutual Funds | Index Funds |
|---|---|---|
| Management Style | Active (tries to beat the market) | Passive (tracks a market index) |
| Fees | Higher (0.50% – 1.50%+) | Lower (0.03% – 0.15%) |
| Goal | Outperform benchmark | Match benchmark |
| Tax Efficiency | Lower (more turnover) | Higher (less turnover) |
| Transparency | Moderate to Low | High (you know the index) |
| Performance (net) | Often underperforms after fees | Typically beats most active funds |
| Who It’s For | Hands-off, trust-the-expert types | Long-term, cost-conscious investors |
MY WAY!
Now, let’s talk about the road less traveled. I don’t buy mutual funds, and I don’t follow the herd into index funds either.
Instead, I build my own version of a mutual fund—except I don’t pay anyone a management fee, and I know exactly what I own.
Shocking, right? It turns out that if you read, research, and pay attention, you don’t need a middleman with a glossy prospectus.
I pick high-quality companies I believe in. I hold them long-term.
I skip the pleasure of owning every overleveraged airline or trendy tech dud just because they made it into the index.
I also manually reinvest my dividends and don’t use DRIP! That made some of you pretty angry – check out more on why here…
I get the diversification I want, the control I value, and none of the fluff. If that makes me a control freak with a spreadsheet addiction—so be it.
At least I’m not paying someone else to underperform for me.
The biggest question I get asked is “Do you own too many individual stocks?” or “How do you have time to manage such as large portfolio?”
The answer to all that is “NO!”
As for the idea that I have to manage that many stocks daily is an absurd statement.
Let me ask you this, when was the last time you went to bed wondering about the long-term stability of Wal-Mart? or what about the inner workings for McDonalds and their ability to make a profit next year.
Exactly, you don’t and never will.
The companies I invest in are the boring, non-headline producing corporations that essentially keep our global economy moving every day. They are the consistent dividend-paying, slow-paint-drying industries that you use every day and don’t realize it.
And when it comes to investing, boring is Good!
And thus far it seems to be working:
2024 Dividend Investing Review
Final Thoughts
At the end of the day, this isn’t about beating Wall Street or proving that individual stock investing is superior for everyone—it’s about alignment.
I believe in understanding what I own, why I own it, and how it fits into the bigger picture of my financial goals.
If I find a reason to not own it any longer, I should have the ability to sell it. This must happen without compromising my entire portfolio.
For some, mutual funds or index funds offer a one-size-fits-most solution—and that’s fine. But for me, investing is personal and a hobby in which I enjoy.
I don’t want a stranger managing my money with vague strategies and high fees.
I want to build something I understand, piece by piece, company by company.
If that means I have to scroll through 10-Ks or dig into earnings reports while someone else binge-watches Netflix, so be it.
I’m not in this to automate my future—I’m here to own it.
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