The Motley Fool: Stocks versus mutual funds – Chron.com

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Ask the Fool

Stocks versus mutual funds

Q: I have mostly individual stocks in my IRA account. Is that reasonable, or should I stick with mutual funds instead? – T.N., Elyria, Ohio

A: It depends. Mutual funds offer convenience and instant diversification. They can also expose you to industries or regions you don’t know very well, such as the international arena. (If you invest in mutual funds, favor those with low fees and talented managers, or just stick with low-fee index funds such as one that tracks the S&P 500.) Carefully selected individual stocks, meanwhile, can deliver bigger returns than most mutual funds can, but that’s far from guaranteed. Plenty of stocks don’t perform well.

For maximum simplicity and market-tracking performance, just use inexpensive broad-market index funds. If you want to try to top that performance, you might park a portion of your portfolio in some carefully selected managed mutual funds and/or individual stocks. Healthy and growing dividend-paying companies can be powerful contributors to a portfolio, and dynamic small-cap companies can come through for you, too.

Foolish Trivia

Name that company

I was created by the same entrepreneur who also founded Waste Management, Republic Services and Extended Stay America – and who has owned the Florida Marlins, the Miami Dolphins and the Florida Panthers. After he bought and expanded Blockbuster Video and sold it for $8.4 billion in 1994, he started buying car franchises, and I became the first nationwide car dealer in America. Today, based in Fort Lauderdale, I sport a market value topping $5 billion. I recently boasted more than 360 new-vehicle franchises and more than 26,000 employees. I’ve sold more than 11 million vehicles. Who am I?

Last week’s trivia answer: IBM

The Take

This stock is going places

The stock price of the Priceline Group (Nasdaq: PCLN) recently topped $1,900, but don’t let that scare you. The stock has surged some twentyfold over the past decade, but it’s likely to keep growing.

Priceline has become the leader in the online travel industry through its combination of pricing power and global coverage. Offering hotels, rental cars, airline tickets and more, Priceline aims to be a one-stop shop for all of its users’ travel needs.

It has made smart acquisitions, with its 2005 purchase of Booking.com having been a prescient move that increased the international scope of its hotel network. The online leader has also done a good job of fighting against the rise of new up-and-coming travel options such as Airbnb, listing private home rentals and similar properties alongside traditional hotel options.

Priceline’s brands include Kayak, Agoda, OpenTable and Rentalcars.com. (The Motley Fool owns shares of and has recommended Priceline.)

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