Odds against you in owning individual stocks/securities 23 · Thursday, December 22, 2011 OAKVILLE BEAVER · www.insideHALTON.com W e recommend you avoid investing in individual securities. It can be extremely risky and harmful to your financial success. Another high-profile stock (Research in Motion -- RIM) has been a disaster to own. Sadly, many investors will have lost a significant amount of money during the last year and that loss will hurt their ability to achieve their financial objectives. RIM has gone from being the darling of Canadian companies to watching its share value plummet 80 per cent this year. Last week, RIM announced a delay in their new line of BlackBerrys with a new operating system. The announcement was made after the stock market closed last Thursday (Dec. 15) and by Friday morning the share value declined further to $14 from $72 earlier this year. Despite the value of its shares, RIM has a lot going for it. During the next quarter they expect to ship more than 11 million units. With record sales of more than $4.6 billion and $1 billion in cash, they will be profitable. An investor can see the logic in buying RIM shares. The problem is their business is contracting and there is fierce competition. Owning the stock has been a disaster. The decline in RIM's prosperity has likely given many investors a loss from which they will never be able to recover. The RIM story was so compelling and the greed factor so great that many investors would have invested too much of their portfolio in just one stock. The question to ask of those investors is why? Why would you be motivated to purchase an individual security? There is ample information that would suggest this would not have been a good investment but a bad gamble. The cold, harsh reality of investing in individual stocks is that, for the most part, it does not work. Sometimes good fortunes prevail but in most cases investors do not realize the gains they had hoped for. Academic research shows that individual managers usually beat the stock market approximately one-third of the time. Two-thirds of f the time their investment results are below the stock market average. There is no formula or theoretical process to determine which managers will be successful in any given year. Success is random. When managers actually beat the market, the margin of victory is small. Losses are mostly larger than market gains. *AL LL REG. PRICED GO OLD JEWELLERY SHOPPING AYS D G REMAININ DECEMBER 23 & 24 Dollars & Sense By Peter Watson 50% *ALL WOMEN'S REG. PRICED FASHIONS The research is clear -- managers do not have the ability to earn investment returns that are better than the stock market average returns. Why would an individual investor attempt to do what the professionals cannot do? Some may not agree with the academic conclusions. Some will continue investing in individual stocks. Our opinion is that ignoring the research is a serious mistake. There is additional evidence supporting this. The investment returns of managers are published widely. It is very easy to conduct your own research by looking at the yearly investment returns and comparing those with the stock market average. You should also look at the returns you make from your own mutual funds. How do those managers compare to the stock market average? How much are your investment fees? Are your managers worth the fees they charge? Owning individual stocks is a gamble and over time you will most likely confirm what the research has already proven. 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A , DEC. 24, 2011, unless otherwise stated, while quantities last. *These savings offers f exclude items with prices ending in .88 & .97, Special Purchases, currently advertised items, clearance items, gold wedding bands, women's Alia, Tan Jay®, Guess, Buffalo f ®, Fast Fashions and Attitude®/MD fashions, women's activewear and swimwear, r Retreat®/MD `Owl', `Hawk', `Falcon' & `Eagle' ® slippers, men's dress shirts over $75 and Calvin Klein brand. **Available A in Sears Department stores only. y Free item must accompany any returns. Value based on Sears reg. price. NE124P211 © 2011. Sears Canada Inc. Shop by phone 1-800-267-3277 Shop online at sears.ca