Stocks or funds in an IRA?

Q: Is it a problem that I’ve filled my IRA account with individual stocks? Should I have mutual funds instead? — C.G., Arlington, Va.

A: It’s not a problem as long as you’ve studied the companies, are confident in their likelihood to grow in value over time, and plan to keep up with their progress and news regularly. If so, and if you’ve chosen well, then you might outperform many mutual funds — though there’s no guarantee, and lots of stocks never live up to their expectations.

Many people don’t have the time, skills or interest to be active investors, though.

For them, mutual funds make sense, offering convenience and diversification, ideally for a low or reasonable fee. Consider focusing your mutual fund dollars on index funds, which are passively managed and simply buy the securities that are in the index they track. They aim to deliver roughly the same return as the index — fewer fees. If you purchase shares in an S&P 500 index fund, for example, you’ll be invested in 500 of America’s biggest companies.

Q: How can a stock be “trading below cash”? — M.V., Issaquah, Wash.

A: That means that the company’s net cash (its cash reserves with debt subtracted) is more than its entire market value -- in other words, its net cash per share exceeds its share price. Some interpret that to mean that a company is greatly undervalued, but others see a red flag. Either way, some research is warranted. The company might have plenty of cash but be burning through it rapidly, for example.

For best investing results, just focus on healthy and growing companies with reasonable or attractive valuations, and, ideally, lots of cash and little to no debt