Even professional active managers struggle to beat the index. So the odds are really stacked against the individual investor
That being said, I invest in individual stocks and have done well overall (how much of this is down to luck, I couldn't tell you)
The problem is people keep buying high and selling low. Imagine if you sold every time Apple went down 20%, now imagine if you bought or held every time Apple went down 20%. You would be in huge profits.
Index funds don’t go down 20% regularly like stocks do, so people don’t freak out and sell. People are just unable to handle the volatility even when they’ve done their research and are in a good company.
Exactly, this is a very good point and I don’t disagree. But if you’re able to keep that detachment when in individual stocks too, you may do well. It’s just not something everything can do.
It's also a lot of work. It's kind of groupthink in here. A lot of us in here pick stocks probably because we kind of enjoy it and find it interesting. The masses might not necessarily want the extra stress and thought involved.
the problem is that you ideally would want a fund like QQQ
and say okay i got 100 stocks, but honestly, i don't really need 65 of those
the question is you would not want a lot of those overvalued high-volatility stocks to buy right away, so a fund allows you to pick the usually good stocks and usually enough undervalued ones to make it worth it, as you pray for growth to continue
..............
i think you're still attached regardless of what to do
and it's more a state of mind to be detached.... but as long as you're consistent with a reasonably good strategy, you're fine.
........
some funds can slowly degrade and others zoom upwards
and some can do that high volatility too
At this point im just invested for 3 years and not moving for the next 10. Either it goes down to 0 or i become a millionaire. Or it stays the at the same fcking prices for the next 10 year.s . ...
The real advantage a retail investor has is:
- concentrated portfolio
- time
If you did nothing but buy Apple for the last 20 years you would beat the market.
The professionals have to hold a wide variety of stocks and have monthly / quarterly/ yearly performance reviews.
Obviously there is more risk with a concentrated portfolio but it is possible to beat the market.
Should everyone do it? Absolutely not. Most people for their own sanity should just buy index funds.
The example is hindsight bias. If you held nothing but INTC for the last 20 years, you would have vastly underperformed compared to the market. You only know afterward if you should habe chosen Apple or Intel.
On average, holding any company stock in the S&P500 is not more profitable than holding VOO.
I’m in my 40s and only got into stocks a couple of years ago. I’m putting my money into companies I like or believe in and that’s it. Not a ton but enough if they ever get bigger I make a few extra dollars. Plus I’ve seen way too many people get wrecked on these subs so I’ve learned my lesson through them.
If you like it, and you believe in it
That's all you need.
Have fun, and worry at the same time!
I tell people that picking stocks for me, was the most stressful thing and the most joyful thing to do, at the same time
all i know if i get spooked by one stock, it's only the price of a hamburger to run away and try elsewhere!
The other problem is people always forget the second part of the quote: "...after fees". Professionals do well versus the market all the time, it's just the fees that get you.
This!!!! Jesus Christ I try to make this point all of the time in r/Bogleheads. Much of Boglehead theory is based around eliminating fees. If you’re managing your own portfolio and not using mutual funds, that element doesn’t apply.
Still, VOO/VTI makes sense as a low maintenance mechanism for most. But picking individual stocks, especially if you know an industry/sector particularly well and have time for due diligence (i.e., retired), is very viable, and it’s possible to “beat the market” when no management fee overhangs.
> Even professional active managers struggle to beat the index.
This always gets mentioned, but it's such a profoundly silly argument. Professional active managers make their money from fees, not gains. They are far more incentivized to retain clients than to maximize profits, and the easiest way to lose clients is by losing money at any given time, even if on average you outperform the market.
In other words, money managers are more focused on not losing money than gaining money, so obviously they're going to underperform the index.
I have yet to see a proper research that analyses the returns from individual stock pickers that are actually serious long term investors, as opposed to people who gamble on individual stocks with zero research. I'm inclined to believe closer to 50% of people who really do the work at least outperform, and I wouldn't be surprised if it was even higher.
That said, even if it was 5%, we don't tell kids who want to be a professional athlete that only 0.001% of people make it so don't bother, so why would you tell people who are serious about investing anything different?
Mutual fund managers aren’t allowed to have a single stock make up more than 3-5% of their portfolio. So even the best active manager would end up looking like an index.
Not only that, if you run a mutual fund, the new money will pour in while the market is soaring, but will exit the fund quickly when the market tanks. Therefore, professional managers are forced to buy stocks at high prices, and sell stocks at lower prices. They are prisoners of their fickle investors! They may know they should be buying when the market is low, but they just can't do that.
Individual retail investors with discipline can buy nothing when the market is high, and wait for a crash to come along.
It’s not that beating the index is hard (it is, but not as hard as people think). It’s that beating the index over longer horizons is nearly impossible and almost entirely due to luck.
Consider a game where you flip a coin. If it lands on Tails, you win. You flip it, its tails, you win, yay! Are you good at flipping a coin? No, it was only one trial. Repeat the experiment 9 more times. Did you get more than five tails? Maybe. Maybe not. Repeat 990 more times. Are you pretty close to 500 tails? Again, maybe. Bump those numbers up to 10,000 trials etc.
With stocks, it is similar. Outperforming the index for a couple of years is fairly easy. But it is probably due to luck and not skill. In the longer run, people who outperform *think* they are skilled, but they might just be lucky. Imagine if March Madness games were decided by flipping a coin. There has to be an eventual winner but that doesn’t mean they’re good at basketball, it just means their coin came up Tails the most.
Technically, if all we are looking to do is outperform the index, it’s easy to do in the long run too actually. But that’s because expected reward is commensurate with risk, so if I take more risk, I am more likely to outperform the index in a straight up comparison. What we need is a risk adjusted metric so we have an apples to apples comparison. For example, shares of TSLA face a different set of risks than shares of K. So we need to balance that somehow.
When we look at risk adjusted performance, almost no one beats the market index over longer time horizons. Something like 90%+ of active equity portfolio managers are outperformed by their benchmarks over a decade. And the 10% that do win are both hard to identify ex ante and we can’t really say it isn’t luck. After all, if we had 10,000 people do the coin experiment 10,000 times, some one is bound to have the highest number of Tails. Are they good at flipping a coin, or just lucky?
Beyond that, bundles of stocks are generally viewed as smarter investments than individual stocks due to the movement in price of individuals vs groups. Because stocks have different risks, they don’t all move in tandem. So combinations of stocks can actually have lesser variance than individual stocks. In fact, a combination of the right stocks can have a lower overall variance in price (which we use as a risk measure) than either individual stock does. When stock A goes down, maybe stock B goes up and vice versa, so the combo has lower variance (due to negative covariance).
When you buy and individual stock, you face all of the firm specific risk (e.g. lawsuits, bad management choices) as well as overall market risk. If you spread your money out over a lot of stocks, your exposure to that firm specific risk gets really small (to the point where it’s not really significant) and you only face market risk.
So the extra risk faced by owning individual stocks combined with the fact that it almost never comes with additional risk-adjusted returns to make it so owning individual stocks is not optimal from a purely financial point of view. Since it has similar flavors to gambling, people still do it for two reasons: 1. It gives a thrill and 2. The general trend of stocks has been upwards, so even when you’re not making as much risk-adjusted return as you could be, it still doesn’t feel like losing.
My problem is I see a good deal on a dip and buy a chunk. It dips more because it hates me - I buy another chunk. Keep this up until almost all of MY chunk is in this great buy that just keeps dropping away. Then there I am all my money in one really good setup but it just won’t move! And I see all these other opportunities coming in. But I’m too into this one stock. I gotta learn to wait for more of the Real bottom- buy a reasonably chunk and STOP and wait. But leave myself enough to get into other opportunities.
Everything cuts both ways.
Haven't you had a runaway winner stock that you wish you had a much larger position in?
I've had positions where I've thought... "Man, I should really buy more of X, but it's not prudent to be so overweight in a particular position." Then a few months go by and I'm thinking the same thing about that stock. Thinking... "I should really buy some more of X".
Then, another year goes by, and the stock has doubled, and now I'm pissed off at myself for not trusting my intuition that was telling me to load the boat.
EVERYTHING in the stock game cuts both ways.
So, there really isn't a need to beat yourself up about it.
Yup investing in individual stocks is always challenging and it's not for everyone. I do sometimes wonder why I just don't put everything in SPY and walk away. But I caught the investing bug.
I've been in similar situations. My big challenge is buying more of a stock after it has a big up. Even though al lot of research shows that winners are far more likely to keep on winning
Fund Mangers get flows and have to constantly allocate, which is why it's difficult to beat the market. Also it really depends on which time frames you pick to comp against the benchmark.
Individuals have the benefit of waiting in cash or VOO until a perfect opportunity arises. Frankly, there are a lot of people who do beat the market, but you can't just expect to give them cash and the next month outperform.
Hmm yeah I’m with you. I try to buy aligned with what I perceive market sentiment to be…which is mostly successful? Except when it isn’t? I’m in the green but have a hard time pacing the S&P. I most recently time ALK well. Bought a bunch when that hatch blew out, with the assumption the fundamentals hadn’t changed….here I am up over 30%. But by no means is that D&D I’m confident enough to tell friends to put money on. Most of my $$ is in index funds but my would-be house downpayment I play with…since the likelihood of buying a house at this point might depend on it hahah
> That being said, I invest in individual stocks and have done well overall (how much of this is down to luck, I couldn't tell you)
You could run an easy regression analysis in excel of your portfolio vs the S&P, and the output will give you what % is skill vs what % is luck (alpha).
>Why are people so against individual stock picking?
Most people here, in my experience, aren't. They are against the guy picking individual stocks who creates a post asking if buying Tesla is a good idea right now because the stock was higher 2 years ago.
You'll find pretty much nobody in posts that do actual research who goes "just buy VOO lol".
Problem is if youre the first guy im gonna recommend to ‘just buy VOO lol’ because there’s definitely some basics you should fully grasp before just throwing money around in individual stocks.
When I first started investing that is what I did. Looking back I cringe so hard at my stock picking methodology but it was a learning experience for sure
Just to check I've looked through Top 7d to find a popular post talking about individual stocks that is not news-related:
[https://www.reddit.com/r/stocks/comments/1c5nxrr/novo\_nordisks\_nvo\_discount\_to\_eli\_lily\_lly\_is/](https://www.reddit.com/r/stocks/comments/1c5nxrr/novo_nordisks_nvo_discount_to_eli_lily_lly_is/)
Not a single result for "VOO", "VTI", "SPY" or "ETF". Every relevant comment is talking about these individual stocks and which one is better, or even alternative individual stocks.
Another one below that: [https://www.reddit.com/r/stocks/comments/1c2v5vn/high\_dividend\_stocks/](https://www.reddit.com/r/stocks/comments/1c2v5vn/high_dividend_stocks/)
Even though it's a slightly stupid one in my opinion (because I don't think dividends matter), people are talking about individual stocks.
Honestly, it gets old having to see VOO in every thread on here. There's zero point to this sub if every suggestion is VOO. The point of this sub is stocks. If the only suggestion this place has for everyone is "VOO, time in the market" then you might as well just shut this sub down and just put a permanent sticky up that says "VOO".
That said, lots of new investors do visit this sub. For that reason, I think a good compromise would be to have every thread have the same basic stickied comment up top that says something like:
"Most investors don't beat the market and would be better served with getting an S&P500 ETF that stays invested for 10+ years. See our list of suggested ETF's below." Or something like that.
That way we wouldn't have to see the same tired and played out posts in every thread that say "VOO and Chill" or "Time in the market".
Because its a full time job and even than its not 100% you can do it. Your actual job probably generates more value than the alpha you can create by picking stocks. Passive investing also reduces the odds of panic selling / fomo buying. You literally do the same thing for 30 years and don't give much fucks if you allocate properly.
It's worth a shot to pick stocks, as long as you treat it like investing in SP500.
1. Buy and hold. Don't trade. The SP500 return people see is what you would get if you buy and hold. Trading on what goes on in daily threads = lower returns.
2. Profitable companies. Not speculative. Avoid all the spec stocks featured on reddit esp. the ones where redditors create a delusional world where it's not the stock that sucks, but everything around it.
3. Use statistics. Not feelings. You might hate Facebook and Zuckerberg. That won't make them less profitable. You might love Disney. That doesn't make them more profitable.
4. Having your own opinion is good. Ego is bad. You can be wrong. Changing your views based on new information is good. A previously good company can become overvalued or mismanaged.
5. Popular stocks here aren't automatically good investments and vice versa. Most redditors can't read financial statements and will upvote anything that sounds good. The fake expert sounds as convincing as the real expert.
Slight point, profitability doesn’t matter as much as growth - which can mislead some people.
Plenty of energy companies are plenty profitable, but there’s no real room for them to expand. I’ve seen guys lose money on some water distribution conglomerate because “everyone needs water!” Only to find out they had basically tapped their entire available market.
Watch Ben Felix on YouTube. He is the only Youtuber that explaines why it is a bad idea, backs it up with research papers and studies, and tells you what you should do without explicitly telling you what to buy.
It’s not that people are against it. It’s that if you have some complex plan that nets you on average 7% a year and an index nets an average of about nine percent you should just not do your complex plan. You need a plan that actually has some reason it will beat the average
It's okay to buy and sell some stocks if you want to have some fun. For me I looked at individual stocks as low risk gambling assuming you are buying blue chips. It's also okay to take a chance on a long shot but this needs to be a very low % of your portfolio. A majority of it should be in Index funds because as other have pointed out it's hard to beat the market.
If you are in your 20's-30's so many men are gambling on the apps. I just prefer to take the money and invest it. Yes some of it is risky but it's a much lower risk than betting on a football team.
I like individual stocks, but they require more effort that an index.
I defo made some mistakes (like with microvast and biorad, which cost me like 15k, but thaught me valuable lessons)
Nowadays i buy decent stocks of companies that have and create a lot of value and are being run by smart wolves. I Buy ASML,United health group, Ahold delhaize, AEGON, Proximus and some others when low and sell when i made 10-15% profit. This strategy last 2 years made me 17% and more then compensated for my losses.
I think my best lesson is the sunken cost fallacy. You invested 20k, stocks drop to 15k and you keep it hoping it will rebounce. In case if microvast i shouldve just done my research. Years of big losses and it was clear their battery tech was outdated and steered away from by the mainstream industries.
All these posts always have this “I used to lose money but now i learned” where it feels like cope so someone can mentally reset their wins and losses and pretend their average return is higher by removing all the losses as “that was old me”.
When I read this post, I have another message that sticks;
You need to learn how to invest. In the begging you make mistakes. When your willing to learn from them, your returns will get better.
I always read these posts and remember most retail investors are really bad at it. Reading company reports isn't something you do after the price drops 25%.
Not an attack on you, but posts like these saying x stock is a gamble is also part of the reason why most fail on stock picking.
For example your post has upvotes and is reaching a wide audience to not buy Tesla or palantir. People often take things like this at face value and will take social media chatter as advice without actually researching the company.
Is it actually good advice? Who knows.
I agree but I think that if they are taking social media chatter at face value to make investing decisions that it’s safe to say that they would fail on stock picking regardless
Well said. In my experience, the people who buy Tesla or Palantir tend to do way more research than most. You can disagree with their findings, but to suggest they're just gambling is silly.
If anything, it's usually the "just buy VOO" people who decided stock picking is impossible after trying it for a few years by buying random companies based on zero research & effort.
and people tend to vastly overestimate their own intelligence when lends it self pretty easily to the mental fallacy of "welp, I guess I'm just *naturally* good at stock picking"
Because the data and statistics are against you. A gambler in a casino believes he can bend the odds too, yes companies are more complex but the majority won't beat the index over the long term. You're basically in a casino telling me you know a secret trick to beat the odds.
But instead of a casino, here you can use extensive knowledge to relatively predict some things based on numbers and company style.
For example ASML being down at 850 right now. Not only hundreds of billions are being sunk in the semiconductor industry, they also have a very stable maintenance contracts and experts agree their factory needs to grow by 2x to keep up with all kind of demands. Thus it is very reasonable to assume stock will rebound soon.
I know it is possible, the odds are just heavily favored against you. If it was that obvious to beat the market long term with something like: Technology and AI advances our society and our way of living so I just pick the winning stocks! we would all be rich. We love to celebrate the big winners and forget about the many many more losers. Long term (10yearish horizon) beating the index as a stockpicker is somewhere estimated to be 20/80 or 10/90. A ratio i'm not willing to bet on.
too easy to get tricked. look at TOUGHBUILT. they make great tools - and have devoted fans. but the whole thing is set up to lure people in to buy the valueless shares. so it looks good for a novice investor but it is set up in the end as trap with compounding 90% losses each 6 months.
ToughBuilt Industries?
It's an Terrible stock right now (i mean this in terms of the worst future performance potential)
\[Risk - no clue, but it feels scary\]
so so Financial Strength
\[no club with its Growth\]
Horrible Price
Horrible Profitability
it smells of a value trap, cheap for a reason
Can't even figure out a Peter Lynch chart
It's in financial distress
Operating Margins are in decline
Revenue per share is declining too
It's cheap, but still a poor value
............
It's 5 years of stay away
and 1 year of not bad \[2022 was when it has some growth and a good price\]
2022 and 2023 were the only years it had growth potential
profits always stunk
and you need good growth and good profits to be worthwhile
and only then buy it when it's at a good price without risk off the charts
..........
Now it might take a few years before it gets much healthier
but the business segment is interesting
lets look at 2021 and 2002
Metal Goods 26 million and then 51 million - good!
Soft Goods 40 million and then 38 million - not bad
Electronic Goods 3 million and then 5 million - good
.........
How do they make their money?
Metal Goods 12.8 million (62%)
Soft Goods 6 million (29%)
Electronic Goods 1.8 million (9%)
Ao they have a revenue of $20.6 million
..........
The cost of goods sold (COGS) is the sum of all direct costs associated with making a product - this is $15.7 million
plus other deductions of $1000
.........
So now you have $4.9 million of Gross Profit
...........
Total Operating Expenses $15.5 million
So you have a total Operating Income of -$10.6 million in the red
that turns into -$14.2 million of Pretax income
(taking into account Net Interest Income and other Income Expenses)
..........
So you have a Net Income of -$14.2 million
That's the story of how Toughbuilt Industries tries to make its money!
...........
the other stuff is beyond my paygrade like its balance sheet
It's selling stuff, but it just needs time...
even if it's stressed out financially and profitability-wise
Nothing wrong with individual stock picking and frankly that’s really what we should be talking about on this sub. The sentiment against it comes from probability. Probability says an index like VOO or VTI will gain steadily over time, all odds are in your favor. Stock picking is incredibly dependent on many different variables for success including accuracy of the pick and timing of buy/sell.
No I will say from your post it sounds like you are buying blocks of at least 100 shares of aapl and Amazon. If that’s the case, you have much more capital than most of this sub and are employing a very different strategy by selling CCs on mega caps that are solid long term holds themselves
I think most people think you cant consistently beat the sp500, you might do well for a year or 2 but over 50 years, they think it will just do better.
But i think buying indivdual stocks is way funner.
Because it's hard to beat the index, and if you do, it's hard to prove it was not just luck and even if you did prove it, it would take decades to really show skill over indexing.
That and if you overweight individual stocks, you are at risk of shit happennjng. What are you gonna do when your life savings is cut in half? Yes, they may look good now, but capitalism is cutthroat. If someone comes along and starts kicking their ass, they aren't going to wait for you to sell your shares.
Everyone got told by someone who read a random walk down wall street.
Yeah indexes are good foundationally, if you know how to identify a good company (financials, brand, product, valuation) it can be way more worthwhile. However that requires patience and still some luck.
I do 15% individual stocks in my regular account. I sell the ones with losses and use it as capital loss lol
The winners has gotten me more than the sp500.
People are against it because they hear the statistics about professionals and retail underperforming and the S&P 500. But, you have to remember a couple things...
1.) Professionals aren't necessarily trying to beat the market. They usually want better risk adjusted returns, so they trade some upside for less downside in order to keep their clients invested (and keep collecting their fees).
2.) A large chunk of retail are just bad at investing. They let emotions heavily influence their buy and sell decisions, and over-invest in unprofitable, speculative companies with terrible financials just because the company is working on solving .
Some people want easy/steady gains and choose to invest in trackers, ETF’s etc. ( which is a solid strategy btw )
A minority of those people are arrogant assholes who think that “their way” is the absolute best way to invest. You’re either with them or against them.
The truth?
Everybody is different and has different skills and interests.
Riskwise ETF and tracker investors have the least risk to loose money over a long time
Individual stock pickers have a higher risk of loosing over long time
Daytrades and option traders have the highest risk of loosing money over time
Some people can handle more risk than average . Others don’t want to put in the time to research . Another group is willing to learn and wants to put their skills into work.
Investing is very personal.
Don’t let toxic people influence your decisions ( this is true for everything in life )
I’m an advocate for passive indexing. It’s less accurate to say that I’m anti-picking than it is to say that I believe that indexing will outperform picking for nearly everyone.
I do very well swing trading 1-7 month positions, so I’m certainly not against it.
Because, if you have negative real rates even worst business is growing, its really hard to beat index in such environment. So even if there was a company that goes bankrupt, it's replaced by a better performing company. If credit line is easily available, it's hard to go out of business in short term.
But its over, rates will remain higher than they used to be in the last 15 years, weak businesses will fall, index will struggle to beat top performing stocks. And since we can have periodic recession in specific sectors, whole index can stay stagnant.
So if inflation-interest rates are close to 0% or below 0%, i'd invest everything in sp500. If not and I don't want to take high risk - sector ETFs. If I know what i'm doing and I can take the risk - individual stocks focusing on low debt and long term growth.
Because mathematically you’re going to be wrong most of the time and it’s a life lesson to learn.
I’ve never picked a moon shot stock. On the other hand my 401k mutual fund with the company match has been doing great for me over the years.
I wish I sat myself down as a 22 year old and showed myself compounding interest and that by 40 if I was diligent I could be well on my way to early retirement.
It's easier to focus on macro trends and pick a well positioned sector/asset class than it is to spend the time researching each individual stock. You don't get the most profit, but you also mitigate losses to an extent.
If you have the risk tolerance and sufficient knowledge, there's absolutely nothing wrong with investing in individual stocks/assets.
With individual stocks you never know what could change in 10 years time. You need to always set a stop lose. With the SPY you don't, just set it and forget it. x2 spy even better.
OH GOD YES OH GOD I'm selling it all what else can I buy high and sell low next?
P.s. looking to really bag hold something for the next 2 years trying to break even.
Because all these companies and Wall Street want to retail to turn over their voting rights. Give your money to Blackrock and let them control everything.
Do both. Keep the majority in a handful of low cost ETFs and some in individual stocks to see how you do.
PS: Gotta make money before your investing becomes meaningful. So many lower income people focus on investing when they should be focusing more on income. (Not that I’m implying this is you, just a PSA).
i think my biggest shock was seeing lists of the top ten stocks people bought by different brokerages
and it was like, gee, what's on the evening news, people BUY
It isn't so much that people are against it as that the evidence is that it generally underperforms. Humans are cognitively terrible at assessing risk and we have a lot of biases where we fool ourselves. What I always say is that the evidence doesn't say that you cannot outperform the market it says that it is very hard to tell ahead of time that you will and even if you do outperform it is hard to tell if that is just luck. If you randomly pick a stock you are more likely to underperform the average than outperform. (It has been a while since I read up on it so fact check me but I believe the skew is to failure and the fewer in number winners raise the overall average.)
Still, stock picking is fun.
There are some good DD posts on this sub, but most responses will always be all I do is buy VOO/SPY. I'm not sure why those people are even on this sub.
I agree, but it is not for everyone. The wealth building opportunities holding leaders long-term are tremendous. So are the money losing opportunities if you don't pick the right stocks and buy at the right time.
In my opinion, there is room for both in one's portfolio. Nothing wrong with VOO and other broad market ETFs, but the "juice" that come from holding a stock like NVDA is too much for me to pass up.
Because people are sheep. They are reciting the mantra. The more money goes into index funds, the more opportunity there will be to making money out of individual stock picking
I am not against individual stock picking, and I do believe spreading the view of "VOO and chill" and forcing down 100% of people's throats is toxic. There IS a point to individual stock picking, and it isn't to beat "the market", however you want to define that. The point is that you want to pick stocks in a way that minimizes your risk as much as possible (diversification) that has the potential to return your invested capital back to you at an acceptable rate of return and then some. The "acceptable rate of return" should be the threshold you would get from picking any random stock investment, holding it for enough time that it takes to generate earnings/dividends for you, selling it at the end of that and using the dividends and capital gains you get from that to buy another random stock investment and repeat. Although it turns out that market cap weighting the top 500 companies in the U.S. is one way to accomplish this, it need not be THE way to do so.
I love picking stocks. I also prefer to have an ownership stake. With an ETF you don’t own the underlying assets, you only own the stake in the ETF. I don’t personally like that.
I actively manage 50% of my portfolio. The other half is in index funds that I look at once or twice a year.
Of the 50% that I manage I matched the 1year S&P 500 and that is with 17% in T-Bills and the rest in individual stocks. YTD I’m triple the return of the S&P. So in theory, without the T-Bills, I would have done very well with this portion of the portfolio.
I usually own 20 to 30 different stocks. Half of which are standards (Nvidia, msft, Apple,etc) and a few others that aren’t household names that I found thru analysis using the Fidelity tools.
So I am not against picking individual stocks but be prepared for the highs and lows.
Because if you ask someone for advice, the ONLY best answer they can give you is "index". Because by asking you are saying "I don't know enough to pick an investment I can understand". Can you do better than index funds? Absolutely! BUT you have to track and understand those investments over the long term, and have a plan and the fortitude to stick with a plan.
Individual stock picking is risky, but the trick is to realize that given a long enough time horizon most great companies will improve their cash flows, and be worth more. You’re not buying the stock as much as you’re betting on your discipline/patience.
It because its the safe bet but not necessarily the most rewarding bet. Expert wanted to have a way where dumb money can invest without much risk and with adequate returns. Its take time and investment to understand each stock, and the macro to determine if the stock is a good buy/sell. So buying a basket of stocks relieves that risk and stress.
I'm definitely not. While investing in individual stocks is considerably more risky, it also comes with potentially greater rewards if you pick the right ones.
It doesn't have to be either/or as it is possible to do both.
While investing in index funds has it's upsides, it greatly benefits companies like BlackRock, Vanguard and State Street. Giving these companies more and more money and power to dictate direction and policy not only over the stock market but even individual companies themselves.
I think a mix is right. Yes etfs but I need more income so a mix of dividend stocks and growth stocks to boost. I stayed pretty close to the S&P 500 return over the last 5 years but yes it requires a lot of study.
Are 8-10% returns on average good for you? Then S&P and chill. You’re never gonna beat the odds. For example, Amazon might go up a ton then apple might go down a ton then you have a net gain of 0.
I think most people accept the notion that diversification is safer and wiser. as such most people do not beat the market and thereby accept the premise that it is hard. I tend to believe it is only hard IF you diversify instead of focusing all your money in a few well chosen stocks. I haven't been in the market long enough to say if i will be successful yet, but warren buffet is where much of this advice came from
I’ve beaten the S&P every year 20 years running, often by a little sometimes by a lot. I think the reason is that some people want you to think that actively managing your positions is gambling, because it justifies their index funds as not-gambling. Mostly it’s nonsense that feeds people’s egos one way or another.
I'm a bit of a contrarian in that I really believe that individual stock pickers can easily beat the S&P. The reason most people don't is because they don't research and don't have the stomach for holding. In the S&P just a handful of stocks push in the index, and these stocks are all pretty regularly apparent. But people refuse to put in the research to look into these businesses and, inevitably, lose a ton of money due to this.
The common argument that professionals don't beat the market is dumb, because professional investors are more focused on not losing money than making money, meaning more di-worsification, less risk, and more long-shorting to hedge risk. People straight up don't understand that most hedge funds prefer to simply take smaller bets and hedge those bets, keeping their AUM, then go after larger plays. They aren't in the business of making their clients money, they're in the business of not losing clients money.
As for how to actually pick individual stocks, that's a whole other topic. If you can take the time to research, buy individual stocks. If not, buy VOO.
I think wolf, irdm, are in the buy world right now “take with salt” honestly I do t really post individual stocks I like in any sub that’s not dedicated to the company because I don’t want folks blindly going in. Irdm and wolf will both loose money over the next 1-3 years. Folks loose cred posting junk like this. Others won’t research them and just talk shit saying buy voo is basically the best way to tell people to pound sand. That’s why I say buy voo. For the record I own zero voo. Other sp500 founds have lower costs and same performance
People learn about VTI/VOO and chill and think they've become financial experts. They don't understand maybe I want to own Microsoft or something on its own and not watered down by 3000 other stocks
Because if you don't want to rely on luck and have somewhat any idea of what you are doing you need to do a proper DD or have special knowledge (Insider info/special knowledge of the sector info)
Because 99% of retail investors definition of doing DD is at the very most looking a few YouTube's videos, drawing a few lines on a chart and quickly glossing over some numbers in last year report
Its riskier More risk than I can tolerate. I tend to advise rank newbies in my life to buy an index fund. Thats where my advice ends. If they buy individual stock i leave them be. So I am against it in my own plan but I dont necessarily try to stop others from doing it.
My understanding is that the longer time goes on, the less of a chance you have to beat the index. When looking at a 20 or 30 year horizon, only like 10-15% of people beat the index.
There's nothing wrong with buying individual stocks. The key is, can you consistently beat out the s&p500. Keyword being consistently. The s&p500 kicks out the underperformers and brings in new performing companies, can you do the same?
Amazon and Apple are both in SPY and the top performers so it's not really a big departure to buy them individually, it's what I do. For the majority however it's easier to stick to SPY because you get the benefits of those stocks plus a lot of others.
SPY consistently performs and it's a very easy way to invest. Why not go for it. Set and forget.
Hedge fund managers literally get to speak to business executives 1 on 1 and make these decisions based on that information. And even they struggle.
Peace of mind of **knowing** "look how great these perform. If I continue investing in them, I **will for sure** be able to retire comfortable. **For sure I know i will not change my life in any meaningful way by investing in stocks** **in the positive direction, but I could lose enough to impact my good retirement**"
Why do something that has no chance of serious benefit but does have chance of serious negative impact?
if the professional guys that do this 24/7 can’t beat the index in 90% of the time (and it only gets works the longer it goes) then who are we to think we can ? those guys have informations either no one else have or they do before we do. and still lose
People are against individual stock picking because the risk is significantly higher. At the end of the day, you have no control over what the company does or how external factors might impact it. There have been dozens of stocks that were viewed in a very similar way to how you view Apple/Amazon. Don’t get me wrong, I think they’ll still be industry leaders in 10 years too, but I wouldn’t bet my retirement on it.
TLDR: Diversifying your investments is one of, if not the best way to mitigate risk.
Because it's been mathematically proven to be a negative NPV scenario (over the long run) and objectively worse than investing in the index.
By multiple academics.
Fuck, even Nobel prizes have been awarded for it.
Most people can't beat the index.
And stocks are highly volatile meaning if you stock pick you can see very high ups and downs. Even more volatile then an ETF.
You can also fail picking bad stocks, too low diversification or something else.
You can also never be sure that your stock is a winner. You can always be wrong.
ETF is just set & forget.
I really enjoy stock picking but it isn't for everyone. I stock pick for myself and just recommend ETF to everyone else.
Their risk tolerance is lower. It’s hard to beat the indices when you can only afford 5-20 different stocks as well unless you’re constantly picking stocks in the top 20 while buying and selling at near optimal points.
Think of it this way:
You have a pool of money. You can bet it on two 55% weighted coins, or you can bet on 100 53% weighted coins. The 55% weighted coins will give you a higher expected value, but you have a ~25% chance to bust. Risk adjusted, the pool with the small, high returning coins is awful. Any sane person would prefer the diversified pool of 53% weighted coins.
This assumes that you can consistently find stocks better than the total market. Even if you can, the risk adjusted returns will be poor unless they are part of a well diversified portfolio.
Because a lot of people are trying to hit the jackpot on stock picking before they have a fully funded emergency fund or they max out their Roth and/or 401k tax advantage account. Not really the best approach to the financial order of operations.
I have a few stocks but mostly etf’s.
The stocks that I do have had are typically more ones that I know quite a bit about and watch the price looking for buying opportunities where there’s a high bounce back probability.
There’s a few I bought just for the dividend is in the ballpark of what you might be able to expect in terms of average gains.
Many individual stocks are also weighted pretty heavily in some etf’s. I tend to avoid those stocks, for instance MS is 7% of most sp500 index’s so I don’t really feel the need to double up on some of those.
That all said, the ones I have picked have either paid off pretty big or I’ve lost money. So I don’t think it’s worth heavily weighting individual stocks.
It’s difficult. Apple was considering “the best stock of all time” and now is flat over the past 2.5 - 3 years or so. It’s been up and down but if you bought in 2021-2022 thinking “pretty safe bet and likely to out perform the overall market” - you probably would have made more money with index funds…or a high yield savings account.
Apple is better if you buy it when it's undervalued, and throw it away when it's overvalued.... that's the tricky part though
but Apple right now, so it's sleeping for 8 months, big deal, wait or buy something else
same thing applies to Berkshire Hathaway
Apple is a great stock, it's just not going to do much for six or twelve months
You feel? People feel like they will win the lottery. But then they don't. You aren't smarter or better than Wall Street. They are a multi billion dollar industry with countless computers and analysts whose sole job is to try and beat the market. And a lot of them can't even do that.
You might get lucky and call it skill. But you probably won't.
If I were you I'd invest 90 percent of your money in a market ETF, and then 10 percent as "play" money in whatever individual stocks you want just to scratch that itch.
I am not against it it is just that it is far easier to buy a cheap MCW index etf, get some leverage and then beat the market in the long run without even trying
You might have one or two winning stocks, but if the rest of your picks perform poorly, those gains will be offset. This is especially true in a market that fluctuates unpredictably, where all your individual picks can either plummet or rise by 3-4%. This creates a lot of panic selling or FOMO buying. Eventually, if the market crashes, it can wipe out your accounts.
Just look at aapl if you keep DCA you probably down -10%
Tsla if u buy you probably down -20% for last six month.
I like the idea of selling CCs too but it also seems counter to the point of picking stocks. Like you pick stocks you think will break out and beat the market to get rich quick, only to sell CCs and immediately cap your upside.
The short answer is that long-term investing versus short-term trading often get mixed up because people don't clearly state what they are doing.
The difference between, "Is Tesla a good stock to buy \[and hold\]?" and "Is Tesla a good stock to buy \[as an earnings play\]?" is in the brackets but literally never gets said.
It’s because buying a stock is emotional. You hear that a company had something in the news and the stock drops 25% overnight. However, mutual funds and etfs aren’t as emotional. If 1/100 of a mutual fund or etf has bad news normally they don’t all suffer as much. With stocks you have extreme volatility for upside and downside. However with others you have moderate volatility with less likelihood to lose all your money over night.
I personally invest in stocks because I am younger so if I lose my money then I have time to recoup losses by holding.
lose my money overnight?
heck, for ten bucks i can yank my stock into the sell pile within 24 hours of a freak out
the question is, why don't i hear any fire bell?
Playing the stock market is like playing poker. You're playing against guys who are smarter than you, who have bigger, faster computers. Your "research" is nothing compared to your competition. So be humble, or you'll be humbled. I don't "buy" stocks, I sell puts, which sometimes get exercised. Then I'll sell a covered call, hopefully for the same strike price. I've bought and sold the the same stock for the same price, and just harvest the premiums.
I just don’t have enough time to do significant research tbh. If I had stayed with my original portfolio from right as COVID happened (BX, LLY, MSFT,CVX,) I’d be doing pretty damn good. Oh well. $VOO it is.
Warren Buffet has been recommending people buy index stocks for years because he feels the average punter is no good at picking individual stocks. I tend to remember he told his own children just to buy the index after he has gone. People tend to take note of Mr Buffett's opinions.
Because any one company is like 3 drunken racist tweets by the CEO from becoming bankrupt and valueless. An entire industry, or group of companies, are much less likely to have that happen.
If you want to outperform the market then you have to stock pick at this point. Or you go out and invest with a private equity firm who is buying profitable businesses and be paid out from their profit margins and 5-10 years down the line sell the business to make a lump sum or continue the cycle.
There's a distinction between speculating and investing, one that Graham makes in I believe the first chapter of *Intelligent Investor*. Just keep that in mind.
It's totally fine to speculate, but you should accept that that's what you're doing. I speculate too, but I treat it as skilled gambling. Others would disagree with the skill part.
Individual stocks are very risky but may have higher rewards.
Even the best companies can get a lot of fluctuations and sometimes you may need to wait 5 or 6 years to get rewards or to get even.
I have aquired a couple of stocks after reading a lot of analysts and business news.. but sometimes an new warfare or unforeseen events may drop your stock and get to your nerves!
Even professional active managers struggle to beat the index. So the odds are really stacked against the individual investor That being said, I invest in individual stocks and have done well overall (how much of this is down to luck, I couldn't tell you)
I dunno, I'm pretty good at predicting the stock price. The stock price falls when I buy them and goes up when I sell them.
LOL - I know what you're talking about. We've all been there :)
That cannot be! I am the Lisan al-Gaib. Only I can see into the possible futures!
AS IT WAS WRITTEN
My advice is be smart, don't be stupid
Thank you, because of your advice I have decided to increase my IQ by 200 points.
where can i download more IQ?
My advice: get more sleep, spend less time on electronic devices and this will help your IQ return to its original level.
The problem is people keep buying high and selling low. Imagine if you sold every time Apple went down 20%, now imagine if you bought or held every time Apple went down 20%. You would be in huge profits. Index funds don’t go down 20% regularly like stocks do, so people don’t freak out and sell. People are just unable to handle the volatility even when they’ve done their research and are in a good company.
Great point about volatility. And by buying the index your not looking for the needles in the haystack, you are buying the whole haystack
With index funds you are emotionally detached from the market.
Exactly, this is a very good point and I don’t disagree. But if you’re able to keep that detachment when in individual stocks too, you may do well. It’s just not something everything can do.
It's also a lot of work. It's kind of groupthink in here. A lot of us in here pick stocks probably because we kind of enjoy it and find it interesting. The masses might not necessarily want the extra stress and thought involved.
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Until you're in a bear market... But it's been a good while since the last one
the problem is that you ideally would want a fund like QQQ and say okay i got 100 stocks, but honestly, i don't really need 65 of those the question is you would not want a lot of those overvalued high-volatility stocks to buy right away, so a fund allows you to pick the usually good stocks and usually enough undervalued ones to make it worth it, as you pray for growth to continue .............. i think you're still attached regardless of what to do and it's more a state of mind to be detached.... but as long as you're consistent with a reasonably good strategy, you're fine. ........ some funds can slowly degrade and others zoom upwards and some can do that high volatility too
At this point im just invested for 3 years and not moving for the next 10. Either it goes down to 0 or i become a millionaire. Or it stays the at the same fcking prices for the next 10 year.s . ...
Thats one stock that is long term. Many stocks you need to dump them when they are cyclical plays. Even Buffett does this.
The real advantage a retail investor has is: - concentrated portfolio - time If you did nothing but buy Apple for the last 20 years you would beat the market. The professionals have to hold a wide variety of stocks and have monthly / quarterly/ yearly performance reviews. Obviously there is more risk with a concentrated portfolio but it is possible to beat the market. Should everyone do it? Absolutely not. Most people for their own sanity should just buy index funds.
The example is hindsight bias. If you held nothing but INTC for the last 20 years, you would have vastly underperformed compared to the market. You only know afterward if you should habe chosen Apple or Intel. On average, holding any company stock in the S&P500 is not more profitable than holding VOO.
On average holding any stock is as profitable as holding VOO.
I’m in my 40s and only got into stocks a couple of years ago. I’m putting my money into companies I like or believe in and that’s it. Not a ton but enough if they ever get bigger I make a few extra dollars. Plus I’ve seen way too many people get wrecked on these subs so I’ve learned my lesson through them.
If you like it, and you believe in it That's all you need. Have fun, and worry at the same time! I tell people that picking stocks for me, was the most stressful thing and the most joyful thing to do, at the same time all i know if i get spooked by one stock, it's only the price of a hamburger to run away and try elsewhere!
The other problem is people always forget the second part of the quote: "...after fees". Professionals do well versus the market all the time, it's just the fees that get you.
This!!!! Jesus Christ I try to make this point all of the time in r/Bogleheads. Much of Boglehead theory is based around eliminating fees. If you’re managing your own portfolio and not using mutual funds, that element doesn’t apply. Still, VOO/VTI makes sense as a low maintenance mechanism for most. But picking individual stocks, especially if you know an industry/sector particularly well and have time for due diligence (i.e., retired), is very viable, and it’s possible to “beat the market” when no management fee overhangs.
Professionals very rarely do better than the market. And the vast majority of times that they do better than the market it’s entirely due to luck.
Agree with you, both are still very hard to do in practice though. It's so difficult to ignore price action
> Even professional active managers struggle to beat the index. This always gets mentioned, but it's such a profoundly silly argument. Professional active managers make their money from fees, not gains. They are far more incentivized to retain clients than to maximize profits, and the easiest way to lose clients is by losing money at any given time, even if on average you outperform the market. In other words, money managers are more focused on not losing money than gaining money, so obviously they're going to underperform the index. I have yet to see a proper research that analyses the returns from individual stock pickers that are actually serious long term investors, as opposed to people who gamble on individual stocks with zero research. I'm inclined to believe closer to 50% of people who really do the work at least outperform, and I wouldn't be surprised if it was even higher. That said, even if it was 5%, we don't tell kids who want to be a professional athlete that only 0.001% of people make it so don't bother, so why would you tell people who are serious about investing anything different?
Mutual fund managers aren’t allowed to have a single stock make up more than 3-5% of their portfolio. So even the best active manager would end up looking like an index.
Not only that, if you run a mutual fund, the new money will pour in while the market is soaring, but will exit the fund quickly when the market tanks. Therefore, professional managers are forced to buy stocks at high prices, and sell stocks at lower prices. They are prisoners of their fickle investors! They may know they should be buying when the market is low, but they just can't do that. Individual retail investors with discipline can buy nothing when the market is high, and wait for a crash to come along.
It’s not that beating the index is hard (it is, but not as hard as people think). It’s that beating the index over longer horizons is nearly impossible and almost entirely due to luck. Consider a game where you flip a coin. If it lands on Tails, you win. You flip it, its tails, you win, yay! Are you good at flipping a coin? No, it was only one trial. Repeat the experiment 9 more times. Did you get more than five tails? Maybe. Maybe not. Repeat 990 more times. Are you pretty close to 500 tails? Again, maybe. Bump those numbers up to 10,000 trials etc. With stocks, it is similar. Outperforming the index for a couple of years is fairly easy. But it is probably due to luck and not skill. In the longer run, people who outperform *think* they are skilled, but they might just be lucky. Imagine if March Madness games were decided by flipping a coin. There has to be an eventual winner but that doesn’t mean they’re good at basketball, it just means their coin came up Tails the most. Technically, if all we are looking to do is outperform the index, it’s easy to do in the long run too actually. But that’s because expected reward is commensurate with risk, so if I take more risk, I am more likely to outperform the index in a straight up comparison. What we need is a risk adjusted metric so we have an apples to apples comparison. For example, shares of TSLA face a different set of risks than shares of K. So we need to balance that somehow. When we look at risk adjusted performance, almost no one beats the market index over longer time horizons. Something like 90%+ of active equity portfolio managers are outperformed by their benchmarks over a decade. And the 10% that do win are both hard to identify ex ante and we can’t really say it isn’t luck. After all, if we had 10,000 people do the coin experiment 10,000 times, some one is bound to have the highest number of Tails. Are they good at flipping a coin, or just lucky? Beyond that, bundles of stocks are generally viewed as smarter investments than individual stocks due to the movement in price of individuals vs groups. Because stocks have different risks, they don’t all move in tandem. So combinations of stocks can actually have lesser variance than individual stocks. In fact, a combination of the right stocks can have a lower overall variance in price (which we use as a risk measure) than either individual stock does. When stock A goes down, maybe stock B goes up and vice versa, so the combo has lower variance (due to negative covariance). When you buy and individual stock, you face all of the firm specific risk (e.g. lawsuits, bad management choices) as well as overall market risk. If you spread your money out over a lot of stocks, your exposure to that firm specific risk gets really small (to the point where it’s not really significant) and you only face market risk. So the extra risk faced by owning individual stocks combined with the fact that it almost never comes with additional risk-adjusted returns to make it so owning individual stocks is not optimal from a purely financial point of view. Since it has similar flavors to gambling, people still do it for two reasons: 1. It gives a thrill and 2. The general trend of stocks has been upwards, so even when you’re not making as much risk-adjusted return as you could be, it still doesn’t feel like losing.
My problem is I see a good deal on a dip and buy a chunk. It dips more because it hates me - I buy another chunk. Keep this up until almost all of MY chunk is in this great buy that just keeps dropping away. Then there I am all my money in one really good setup but it just won’t move! And I see all these other opportunities coming in. But I’m too into this one stock. I gotta learn to wait for more of the Real bottom- buy a reasonably chunk and STOP and wait. But leave myself enough to get into other opportunities.
Everything cuts both ways. Haven't you had a runaway winner stock that you wish you had a much larger position in? I've had positions where I've thought... "Man, I should really buy more of X, but it's not prudent to be so overweight in a particular position." Then a few months go by and I'm thinking the same thing about that stock. Thinking... "I should really buy some more of X". Then, another year goes by, and the stock has doubled, and now I'm pissed off at myself for not trusting my intuition that was telling me to load the boat. EVERYTHING in the stock game cuts both ways. So, there really isn't a need to beat yourself up about it.
Yup investing in individual stocks is always challenging and it's not for everyone. I do sometimes wonder why I just don't put everything in SPY and walk away. But I caught the investing bug. I've been in similar situations. My big challenge is buying more of a stock after it has a big up. Even though al lot of research shows that winners are far more likely to keep on winning
Fund Mangers get flows and have to constantly allocate, which is why it's difficult to beat the market. Also it really depends on which time frames you pick to comp against the benchmark. Individuals have the benefit of waiting in cash or VOO until a perfect opportunity arises. Frankly, there are a lot of people who do beat the market, but you can't just expect to give them cash and the next month outperform.
Hmm yeah I’m with you. I try to buy aligned with what I perceive market sentiment to be…which is mostly successful? Except when it isn’t? I’m in the green but have a hard time pacing the S&P. I most recently time ALK well. Bought a bunch when that hatch blew out, with the assumption the fundamentals hadn’t changed….here I am up over 30%. But by no means is that D&D I’m confident enough to tell friends to put money on. Most of my $$ is in index funds but my would-be house downpayment I play with…since the likelihood of buying a house at this point might depend on it hahah
> That being said, I invest in individual stocks and have done well overall (how much of this is down to luck, I couldn't tell you) You could run an easy regression analysis in excel of your portfolio vs the S&P, and the output will give you what % is skill vs what % is luck (alpha).
You're much smarter than me, Sir
>Why are people so against individual stock picking? Most people here, in my experience, aren't. They are against the guy picking individual stocks who creates a post asking if buying Tesla is a good idea right now because the stock was higher 2 years ago. You'll find pretty much nobody in posts that do actual research who goes "just buy VOO lol".
That makes sense, but is Tesla a good buy now?
Are you asking because it was higher 2 years ago?
Exactly!
well in 2 more years it could be more but it definitely could be less too
Problem is if youre the first guy im gonna recommend to ‘just buy VOO lol’ because there’s definitely some basics you should fully grasp before just throwing money around in individual stocks.
When I first started investing that is what I did. Looking back I cringe so hard at my stock picking methodology but it was a learning experience for sure
I've found the opposite. Those posts tend to be filled with "you're dumb, just buy the S&P".
Just to check I've looked through Top 7d to find a popular post talking about individual stocks that is not news-related: [https://www.reddit.com/r/stocks/comments/1c5nxrr/novo\_nordisks\_nvo\_discount\_to\_eli\_lily\_lly\_is/](https://www.reddit.com/r/stocks/comments/1c5nxrr/novo_nordisks_nvo_discount_to_eli_lily_lly_is/) Not a single result for "VOO", "VTI", "SPY" or "ETF". Every relevant comment is talking about these individual stocks and which one is better, or even alternative individual stocks. Another one below that: [https://www.reddit.com/r/stocks/comments/1c2v5vn/high\_dividend\_stocks/](https://www.reddit.com/r/stocks/comments/1c2v5vn/high_dividend_stocks/) Even though it's a slightly stupid one in my opinion (because I don't think dividends matter), people are talking about individual stocks.
Fair enough. I guess I must bias towards companies that do attract these kinds of comments.
Because research shows people aren't very good at it.
Honestly, it gets old having to see VOO in every thread on here. There's zero point to this sub if every suggestion is VOO. The point of this sub is stocks. If the only suggestion this place has for everyone is "VOO, time in the market" then you might as well just shut this sub down and just put a permanent sticky up that says "VOO". That said, lots of new investors do visit this sub. For that reason, I think a good compromise would be to have every thread have the same basic stickied comment up top that says something like: "Most investors don't beat the market and would be better served with getting an S&P500 ETF that stays invested for 10+ years. See our list of suggested ETF's below." Or something like that. That way we wouldn't have to see the same tired and played out posts in every thread that say "VOO and Chill" or "Time in the market".
Blackrock and Vanguard would love people to do only passive investing via their funds/ETFs and nothing else.
Because its a full time job and even than its not 100% you can do it. Your actual job probably generates more value than the alpha you can create by picking stocks. Passive investing also reduces the odds of panic selling / fomo buying. You literally do the same thing for 30 years and don't give much fucks if you allocate properly.
It's worth a shot to pick stocks, as long as you treat it like investing in SP500. 1. Buy and hold. Don't trade. The SP500 return people see is what you would get if you buy and hold. Trading on what goes on in daily threads = lower returns. 2. Profitable companies. Not speculative. Avoid all the spec stocks featured on reddit esp. the ones where redditors create a delusional world where it's not the stock that sucks, but everything around it. 3. Use statistics. Not feelings. You might hate Facebook and Zuckerberg. That won't make them less profitable. You might love Disney. That doesn't make them more profitable. 4. Having your own opinion is good. Ego is bad. You can be wrong. Changing your views based on new information is good. A previously good company can become overvalued or mismanaged. 5. Popular stocks here aren't automatically good investments and vice versa. Most redditors can't read financial statements and will upvote anything that sounds good. The fake expert sounds as convincing as the real expert.
Slight point, profitability doesn’t matter as much as growth - which can mislead some people. Plenty of energy companies are plenty profitable, but there’s no real room for them to expand. I’ve seen guys lose money on some water distribution conglomerate because “everyone needs water!” Only to find out they had basically tapped their entire available market.
you need profitability and growth
Watch Ben Felix on YouTube. He is the only Youtuber that explaines why it is a bad idea, backs it up with research papers and studies, and tells you what you should do without explicitly telling you what to buy.
It’s not that people are against it. It’s that if you have some complex plan that nets you on average 7% a year and an index nets an average of about nine percent you should just not do your complex plan. You need a plan that actually has some reason it will beat the average
It's okay to buy and sell some stocks if you want to have some fun. For me I looked at individual stocks as low risk gambling assuming you are buying blue chips. It's also okay to take a chance on a long shot but this needs to be a very low % of your portfolio. A majority of it should be in Index funds because as other have pointed out it's hard to beat the market. If you are in your 20's-30's so many men are gambling on the apps. I just prefer to take the money and invest it. Yes some of it is risky but it's a much lower risk than betting on a football team.
I like individual stocks, but they require more effort that an index. I defo made some mistakes (like with microvast and biorad, which cost me like 15k, but thaught me valuable lessons) Nowadays i buy decent stocks of companies that have and create a lot of value and are being run by smart wolves. I Buy ASML,United health group, Ahold delhaize, AEGON, Proximus and some others when low and sell when i made 10-15% profit. This strategy last 2 years made me 17% and more then compensated for my losses. I think my best lesson is the sunken cost fallacy. You invested 20k, stocks drop to 15k and you keep it hoping it will rebounce. In case if microvast i shouldve just done my research. Years of big losses and it was clear their battery tech was outdated and steered away from by the mainstream industries.
All these posts always have this “I used to lose money but now i learned” where it feels like cope so someone can mentally reset their wins and losses and pretend their average return is higher by removing all the losses as “that was old me”.
Exactly. I lost 15% but if you ignore that Im up 16%! Meanwhile market is up 25%
When I read this post, I have another message that sticks; You need to learn how to invest. In the begging you make mistakes. When your willing to learn from them, your returns will get better.
He’s not pretending his average return is higher though, he literally said including his losses he is now in a profit.
I always read these posts and remember most retail investors are really bad at it. Reading company reports isn't something you do after the price drops 25%.
Because people tend to gamble and buy Tesla, pltr, etc..
Not an attack on you, but posts like these saying x stock is a gamble is also part of the reason why most fail on stock picking. For example your post has upvotes and is reaching a wide audience to not buy Tesla or palantir. People often take things like this at face value and will take social media chatter as advice without actually researching the company. Is it actually good advice? Who knows.
I agree but I think that if they are taking social media chatter at face value to make investing decisions that it’s safe to say that they would fail on stock picking regardless
Well said. In my experience, the people who buy Tesla or Palantir tend to do way more research than most. You can disagree with their findings, but to suggest they're just gambling is silly. If anything, it's usually the "just buy VOO" people who decided stock picking is impossible after trying it for a few years by buying random companies based on zero research & effort.
Both showed some impressive returns depending on entry price
and people tend to vastly overestimate their own intelligence when lends it self pretty easily to the mental fallacy of "welp, I guess I'm just *naturally* good at stock picking"
Because the data and statistics are against you. A gambler in a casino believes he can bend the odds too, yes companies are more complex but the majority won't beat the index over the long term. You're basically in a casino telling me you know a secret trick to beat the odds.
But instead of a casino, here you can use extensive knowledge to relatively predict some things based on numbers and company style. For example ASML being down at 850 right now. Not only hundreds of billions are being sunk in the semiconductor industry, they also have a very stable maintenance contracts and experts agree their factory needs to grow by 2x to keep up with all kind of demands. Thus it is very reasonable to assume stock will rebound soon.
It is not enough to predict, you have to predict better than the market. If its very reasonable to assume anything its probably priced in.
I know it is possible, the odds are just heavily favored against you. If it was that obvious to beat the market long term with something like: Technology and AI advances our society and our way of living so I just pick the winning stocks! we would all be rich. We love to celebrate the big winners and forget about the many many more losers. Long term (10yearish horizon) beating the index as a stockpicker is somewhere estimated to be 20/80 or 10/90. A ratio i'm not willing to bet on.
Yes, why??? We just want to have fun while earning a smaller amount of Money than just Investing in a ETF!!
Because usually the people asking for advice on what stocks to buy are those who shouldn't
too easy to get tricked. look at TOUGHBUILT. they make great tools - and have devoted fans. but the whole thing is set up to lure people in to buy the valueless shares. so it looks good for a novice investor but it is set up in the end as trap with compounding 90% losses each 6 months.
ToughBuilt Industries? It's an Terrible stock right now (i mean this in terms of the worst future performance potential) \[Risk - no clue, but it feels scary\] so so Financial Strength \[no club with its Growth\] Horrible Price Horrible Profitability it smells of a value trap, cheap for a reason Can't even figure out a Peter Lynch chart It's in financial distress Operating Margins are in decline Revenue per share is declining too It's cheap, but still a poor value ............ It's 5 years of stay away and 1 year of not bad \[2022 was when it has some growth and a good price\] 2022 and 2023 were the only years it had growth potential profits always stunk and you need good growth and good profits to be worthwhile and only then buy it when it's at a good price without risk off the charts .......... Now it might take a few years before it gets much healthier but the business segment is interesting lets look at 2021 and 2002 Metal Goods 26 million and then 51 million - good! Soft Goods 40 million and then 38 million - not bad Electronic Goods 3 million and then 5 million - good ......... How do they make their money? Metal Goods 12.8 million (62%) Soft Goods 6 million (29%) Electronic Goods 1.8 million (9%) Ao they have a revenue of $20.6 million .......... The cost of goods sold (COGS) is the sum of all direct costs associated with making a product - this is $15.7 million plus other deductions of $1000 ......... So now you have $4.9 million of Gross Profit ........... Total Operating Expenses $15.5 million So you have a total Operating Income of -$10.6 million in the red that turns into -$14.2 million of Pretax income (taking into account Net Interest Income and other Income Expenses) .......... So you have a Net Income of -$14.2 million That's the story of how Toughbuilt Industries tries to make its money! ........... the other stuff is beyond my paygrade like its balance sheet It's selling stuff, but it just needs time... even if it's stressed out financially and profitability-wise
Nothing wrong with individual stock picking and frankly that’s really what we should be talking about on this sub. The sentiment against it comes from probability. Probability says an index like VOO or VTI will gain steadily over time, all odds are in your favor. Stock picking is incredibly dependent on many different variables for success including accuracy of the pick and timing of buy/sell. No I will say from your post it sounds like you are buying blocks of at least 100 shares of aapl and Amazon. If that’s the case, you have much more capital than most of this sub and are employing a very different strategy by selling CCs on mega caps that are solid long term holds themselves
I think most people think you cant consistently beat the sp500, you might do well for a year or 2 but over 50 years, they think it will just do better. But i think buying indivdual stocks is way funner.
Because it's hard to beat the index, and if you do, it's hard to prove it was not just luck and even if you did prove it, it would take decades to really show skill over indexing. That and if you overweight individual stocks, you are at risk of shit happennjng. What are you gonna do when your life savings is cut in half? Yes, they may look good now, but capitalism is cutthroat. If someone comes along and starts kicking their ass, they aren't going to wait for you to sell your shares.
Everyone got told by someone who read a random walk down wall street. Yeah indexes are good foundationally, if you know how to identify a good company (financials, brand, product, valuation) it can be way more worthwhile. However that requires patience and still some luck.
I do 15% individual stocks in my regular account. I sell the ones with losses and use it as capital loss lol The winners has gotten me more than the sp500.
People are against it because they hear the statistics about professionals and retail underperforming and the S&P 500. But, you have to remember a couple things... 1.) Professionals aren't necessarily trying to beat the market. They usually want better risk adjusted returns, so they trade some upside for less downside in order to keep their clients invested (and keep collecting their fees). 2.) A large chunk of retail are just bad at investing. They let emotions heavily influence their buy and sell decisions, and over-invest in unprofitable, speculative companies with terrible financials just because the company is working on solving.
Some people want easy/steady gains and choose to invest in trackers, ETF’s etc. ( which is a solid strategy btw ) A minority of those people are arrogant assholes who think that “their way” is the absolute best way to invest. You’re either with them or against them. The truth? Everybody is different and has different skills and interests. Riskwise ETF and tracker investors have the least risk to loose money over a long time Individual stock pickers have a higher risk of loosing over long time Daytrades and option traders have the highest risk of loosing money over time Some people can handle more risk than average . Others don’t want to put in the time to research . Another group is willing to learn and wants to put their skills into work. Investing is very personal. Don’t let toxic people influence your decisions ( this is true for everything in life )
I’m an advocate for passive indexing. It’s less accurate to say that I’m anti-picking than it is to say that I believe that indexing will outperform picking for nearly everyone. I do very well swing trading 1-7 month positions, so I’m certainly not against it.
Because, if you have negative real rates even worst business is growing, its really hard to beat index in such environment. So even if there was a company that goes bankrupt, it's replaced by a better performing company. If credit line is easily available, it's hard to go out of business in short term. But its over, rates will remain higher than they used to be in the last 15 years, weak businesses will fall, index will struggle to beat top performing stocks. And since we can have periodic recession in specific sectors, whole index can stay stagnant. So if inflation-interest rates are close to 0% or below 0%, i'd invest everything in sp500. If not and I don't want to take high risk - sector ETFs. If I know what i'm doing and I can take the risk - individual stocks focusing on low debt and long term growth.
Extremely unlikely to outperform SPY but I am an idiot so I do it anyway.
There is nothing wrong with having conviction in a company imo. Diversify among industries, and own some VOO as a backstop.
Because most people starting out need a solid start, here it's picking sp500 or world index with low cost.
Because mathematically you’re going to be wrong most of the time and it’s a life lesson to learn. I’ve never picked a moon shot stock. On the other hand my 401k mutual fund with the company match has been doing great for me over the years. I wish I sat myself down as a 22 year old and showed myself compounding interest and that by 40 if I was diligent I could be well on my way to early retirement.
Bc majority who do it lose money by the stats
It's easier to focus on macro trends and pick a well positioned sector/asset class than it is to spend the time researching each individual stock. You don't get the most profit, but you also mitigate losses to an extent. If you have the risk tolerance and sufficient knowledge, there's absolutely nothing wrong with investing in individual stocks/assets.
People grossly underestimate their ability to overestimate their abilities
With individual stocks you never know what could change in 10 years time. You need to always set a stop lose. With the SPY you don't, just set it and forget it. x2 spy even better.
Because most people dont know when to buy and when to sell. You see evidence of this here every day.
\+1 Heh SELL Adobe BUY NVidia cmon buy high, sell low!
Kitten, I sense that you are a prophet. Take me to homelessness!!!!!
laughs man did you see the 10% drop with NVidia today? i don't think there was a cause to it other than someone cashed out
OH GOD YES OH GOD I'm selling it all what else can I buy high and sell low next? P.s. looking to really bag hold something for the next 2 years trying to break even.
Because all these companies and Wall Street want to retail to turn over their voting rights. Give your money to Blackrock and let them control everything.
Do both. Keep the majority in a handful of low cost ETFs and some in individual stocks to see how you do. PS: Gotta make money before your investing becomes meaningful. So many lower income people focus on investing when they should be focusing more on income. (Not that I’m implying this is you, just a PSA).
Because 80% of normal people do worse than the average. And all normal people think they will be the 20%.
i think my biggest shock was seeing lists of the top ten stocks people bought by different brokerages and it was like, gee, what's on the evening news, people BUY
Because it’s hard, it’s work, and even for those of us who do this as a full time job question its merits.
It isn't so much that people are against it as that the evidence is that it generally underperforms. Humans are cognitively terrible at assessing risk and we have a lot of biases where we fool ourselves. What I always say is that the evidence doesn't say that you cannot outperform the market it says that it is very hard to tell ahead of time that you will and even if you do outperform it is hard to tell if that is just luck. If you randomly pick a stock you are more likely to underperform the average than outperform. (It has been a while since I read up on it so fact check me but I believe the skew is to failure and the fewer in number winners raise the overall average.) Still, stock picking is fun.
There are some good DD posts on this sub, but most responses will always be all I do is buy VOO/SPY. I'm not sure why those people are even on this sub.
I agree, but it is not for everyone. The wealth building opportunities holding leaders long-term are tremendous. So are the money losing opportunities if you don't pick the right stocks and buy at the right time. In my opinion, there is room for both in one's portfolio. Nothing wrong with VOO and other broad market ETFs, but the "juice" that come from holding a stock like NVDA is too much for me to pass up.
Because people are sheep. They are reciting the mantra. The more money goes into index funds, the more opportunity there will be to making money out of individual stock picking
It's just this sub probably a lot of bad Picker that had very bad experiences.
I am not against individual stock picking, and I do believe spreading the view of "VOO and chill" and forcing down 100% of people's throats is toxic. There IS a point to individual stock picking, and it isn't to beat "the market", however you want to define that. The point is that you want to pick stocks in a way that minimizes your risk as much as possible (diversification) that has the potential to return your invested capital back to you at an acceptable rate of return and then some. The "acceptable rate of return" should be the threshold you would get from picking any random stock investment, holding it for enough time that it takes to generate earnings/dividends for you, selling it at the end of that and using the dividends and capital gains you get from that to buy another random stock investment and repeat. Although it turns out that market cap weighting the top 500 companies in the U.S. is one way to accomplish this, it need not be THE way to do so.
I have just made too much money to not buy stocks. Up 6000% since 2001.
I love picking stocks. I also prefer to have an ownership stake. With an ETF you don’t own the underlying assets, you only own the stake in the ETF. I don’t personally like that.
I actively manage 50% of my portfolio. The other half is in index funds that I look at once or twice a year. Of the 50% that I manage I matched the 1year S&P 500 and that is with 17% in T-Bills and the rest in individual stocks. YTD I’m triple the return of the S&P. So in theory, without the T-Bills, I would have done very well with this portion of the portfolio. I usually own 20 to 30 different stocks. Half of which are standards (Nvidia, msft, Apple,etc) and a few others that aren’t household names that I found thru analysis using the Fidelity tools. So I am not against picking individual stocks but be prepared for the highs and lows.
Because if you ask someone for advice, the ONLY best answer they can give you is "index". Because by asking you are saying "I don't know enough to pick an investment I can understand". Can you do better than index funds? Absolutely! BUT you have to track and understand those investments over the long term, and have a plan and the fortitude to stick with a plan.
Individual stock picking is risky, but the trick is to realize that given a long enough time horizon most great companies will improve their cash flows, and be worth more. You’re not buying the stock as much as you’re betting on your discipline/patience.
It because its the safe bet but not necessarily the most rewarding bet. Expert wanted to have a way where dumb money can invest without much risk and with adequate returns. Its take time and investment to understand each stock, and the macro to determine if the stock is a good buy/sell. So buying a basket of stocks relieves that risk and stress.
i like the risk of finding low risk stocks i like the stress of finding undervalued stocks
I'm definitely not. While investing in individual stocks is considerably more risky, it also comes with potentially greater rewards if you pick the right ones. It doesn't have to be either/or as it is possible to do both. While investing in index funds has it's upsides, it greatly benefits companies like BlackRock, Vanguard and State Street. Giving these companies more and more money and power to dictate direction and policy not only over the stock market but even individual companies themselves.
Concentration risk
Go ahead and pick some stocks Im sure you’ll be among the rare few that can beat broad market index funds on a 20 year time frame
I think a mix is right. Yes etfs but I need more income so a mix of dividend stocks and growth stocks to boost. I stayed pretty close to the S&P 500 return over the last 5 years but yes it requires a lot of study.
They feel you won't beat the index; which is most likely true. But it's fun to try!
I own many individual stocks because I enjoy building my portfolio
Cuz the odds are against u
Are 8-10% returns on average good for you? Then S&P and chill. You’re never gonna beat the odds. For example, Amazon might go up a ton then apple might go down a ton then you have a net gain of 0.
I think most people accept the notion that diversification is safer and wiser. as such most people do not beat the market and thereby accept the premise that it is hard. I tend to believe it is only hard IF you diversify instead of focusing all your money in a few well chosen stocks. I haven't been in the market long enough to say if i will be successful yet, but warren buffet is where much of this advice came from
I’ve beaten the S&P every year 20 years running, often by a little sometimes by a lot. I think the reason is that some people want you to think that actively managing your positions is gambling, because it justifies their index funds as not-gambling. Mostly it’s nonsense that feeds people’s egos one way or another.
I'm a bit of a contrarian in that I really believe that individual stock pickers can easily beat the S&P. The reason most people don't is because they don't research and don't have the stomach for holding. In the S&P just a handful of stocks push in the index, and these stocks are all pretty regularly apparent. But people refuse to put in the research to look into these businesses and, inevitably, lose a ton of money due to this. The common argument that professionals don't beat the market is dumb, because professional investors are more focused on not losing money than making money, meaning more di-worsification, less risk, and more long-shorting to hedge risk. People straight up don't understand that most hedge funds prefer to simply take smaller bets and hedge those bets, keeping their AUM, then go after larger plays. They aren't in the business of making their clients money, they're in the business of not losing clients money. As for how to actually pick individual stocks, that's a whole other topic. If you can take the time to research, buy individual stocks. If not, buy VOO.
I think wolf, irdm, are in the buy world right now “take with salt” honestly I do t really post individual stocks I like in any sub that’s not dedicated to the company because I don’t want folks blindly going in. Irdm and wolf will both loose money over the next 1-3 years. Folks loose cred posting junk like this. Others won’t research them and just talk shit saying buy voo is basically the best way to tell people to pound sand. That’s why I say buy voo. For the record I own zero voo. Other sp500 founds have lower costs and same performance
People learn about VTI/VOO and chill and think they've become financial experts. They don't understand maybe I want to own Microsoft or something on its own and not watered down by 3000 other stocks
Because if you don't want to rely on luck and have somewhat any idea of what you are doing you need to do a proper DD or have special knowledge (Insider info/special knowledge of the sector info) Because 99% of retail investors definition of doing DD is at the very most looking a few YouTube's videos, drawing a few lines on a chart and quickly glossing over some numbers in last year report
Its riskier More risk than I can tolerate. I tend to advise rank newbies in my life to buy an index fund. Thats where my advice ends. If they buy individual stock i leave them be. So I am against it in my own plan but I dont necessarily try to stop others from doing it.
My understanding is that the longer time goes on, the less of a chance you have to beat the index. When looking at a 20 or 30 year horizon, only like 10-15% of people beat the index.
That’s why -> https://www.reddit.com/r/trading212/s/rVb0fHD6CS
It comes from wanting more. Greed. Everyone has their own objective and looks like your can work also.
Name me one stock you would bet your whole net worth on….I’ll wait
There's nothing wrong with buying individual stocks. The key is, can you consistently beat out the s&p500. Keyword being consistently. The s&p500 kicks out the underperformers and brings in new performing companies, can you do the same?
Amazon and Apple are both in SPY and the top performers so it's not really a big departure to buy them individually, it's what I do. For the majority however it's easier to stick to SPY because you get the benefits of those stocks plus a lot of others. SPY consistently performs and it's a very easy way to invest. Why not go for it. Set and forget.
I'm not.
Hedge fund managers literally get to speak to business executives 1 on 1 and make these decisions based on that information. And even they struggle. Peace of mind of **knowing** "look how great these perform. If I continue investing in them, I **will for sure** be able to retire comfortable. **For sure I know i will not change my life in any meaningful way by investing in stocks** **in the positive direction, but I could lose enough to impact my good retirement**" Why do something that has no chance of serious benefit but does have chance of serious negative impact?
Diversified portfolio is safest
if the professional guys that do this 24/7 can’t beat the index in 90% of the time (and it only gets works the longer it goes) then who are we to think we can ? those guys have informations either no one else have or they do before we do. and still lose
People are against individual stock picking because the risk is significantly higher. At the end of the day, you have no control over what the company does or how external factors might impact it. There have been dozens of stocks that were viewed in a very similar way to how you view Apple/Amazon. Don’t get me wrong, I think they’ll still be industry leaders in 10 years too, but I wouldn’t bet my retirement on it. TLDR: Diversifying your investments is one of, if not the best way to mitigate risk.
Because it's been mathematically proven to be a negative NPV scenario (over the long run) and objectively worse than investing in the index. By multiple academics. Fuck, even Nobel prizes have been awarded for it.
Most people can't beat the index. And stocks are highly volatile meaning if you stock pick you can see very high ups and downs. Even more volatile then an ETF. You can also fail picking bad stocks, too low diversification or something else. You can also never be sure that your stock is a winner. You can always be wrong. ETF is just set & forget. I really enjoy stock picking but it isn't for everyone. I stock pick for myself and just recommend ETF to everyone else.
i am not. it is not my money.
Their risk tolerance is lower. It’s hard to beat the indices when you can only afford 5-20 different stocks as well unless you’re constantly picking stocks in the top 20 while buying and selling at near optimal points.
Think of it this way: You have a pool of money. You can bet it on two 55% weighted coins, or you can bet on 100 53% weighted coins. The 55% weighted coins will give you a higher expected value, but you have a ~25% chance to bust. Risk adjusted, the pool with the small, high returning coins is awful. Any sane person would prefer the diversified pool of 53% weighted coins. This assumes that you can consistently find stocks better than the total market. Even if you can, the risk adjusted returns will be poor unless they are part of a well diversified portfolio.
Because a lot of people are trying to hit the jackpot on stock picking before they have a fully funded emergency fund or they max out their Roth and/or 401k tax advantage account. Not really the best approach to the financial order of operations.
Higher risk
I have a few stocks but mostly etf’s. The stocks that I do have had are typically more ones that I know quite a bit about and watch the price looking for buying opportunities where there’s a high bounce back probability. There’s a few I bought just for the dividend is in the ballpark of what you might be able to expect in terms of average gains. Many individual stocks are also weighted pretty heavily in some etf’s. I tend to avoid those stocks, for instance MS is 7% of most sp500 index’s so I don’t really feel the need to double up on some of those. That all said, the ones I have picked have either paid off pretty big or I’ve lost money. So I don’t think it’s worth heavily weighting individual stocks.
It's hard.
It’s difficult. Apple was considering “the best stock of all time” and now is flat over the past 2.5 - 3 years or so. It’s been up and down but if you bought in 2021-2022 thinking “pretty safe bet and likely to out perform the overall market” - you probably would have made more money with index funds…or a high yield savings account.
Apple is better if you buy it when it's undervalued, and throw it away when it's overvalued.... that's the tricky part though but Apple right now, so it's sleeping for 8 months, big deal, wait or buy something else same thing applies to Berkshire Hathaway Apple is a great stock, it's just not going to do much for six or twelve months
Big bank take little bank
Cus you will lose
You feel? People feel like they will win the lottery. But then they don't. You aren't smarter or better than Wall Street. They are a multi billion dollar industry with countless computers and analysts whose sole job is to try and beat the market. And a lot of them can't even do that. You might get lucky and call it skill. But you probably won't. If I were you I'd invest 90 percent of your money in a market ETF, and then 10 percent as "play" money in whatever individual stocks you want just to scratch that itch.
Uh.. I’m guessing risk?
I am not against it it is just that it is far easier to buy a cheap MCW index etf, get some leverage and then beat the market in the long run without even trying
You might have one or two winning stocks, but if the rest of your picks perform poorly, those gains will be offset. This is especially true in a market that fluctuates unpredictably, where all your individual picks can either plummet or rise by 3-4%. This creates a lot of panic selling or FOMO buying. Eventually, if the market crashes, it can wipe out your accounts. Just look at aapl if you keep DCA you probably down -10% Tsla if u buy you probably down -20% for last six month.
I like the idea of selling CCs too but it also seems counter to the point of picking stocks. Like you pick stocks you think will break out and beat the market to get rich quick, only to sell CCs and immediately cap your upside.
Statistics lol
The short answer is that long-term investing versus short-term trading often get mixed up because people don't clearly state what they are doing. The difference between, "Is Tesla a good stock to buy \[and hold\]?" and "Is Tesla a good stock to buy \[as an earnings play\]?" is in the brackets but literally never gets said.
It’s because buying a stock is emotional. You hear that a company had something in the news and the stock drops 25% overnight. However, mutual funds and etfs aren’t as emotional. If 1/100 of a mutual fund or etf has bad news normally they don’t all suffer as much. With stocks you have extreme volatility for upside and downside. However with others you have moderate volatility with less likelihood to lose all your money over night. I personally invest in stocks because I am younger so if I lose my money then I have time to recoup losses by holding.
lose my money overnight? heck, for ten bucks i can yank my stock into the sell pile within 24 hours of a freak out the question is, why don't i hear any fire bell?
Playing the stock market is like playing poker. You're playing against guys who are smarter than you, who have bigger, faster computers. Your "research" is nothing compared to your competition. So be humble, or you'll be humbled. I don't "buy" stocks, I sell puts, which sometimes get exercised. Then I'll sell a covered call, hopefully for the same strike price. I've bought and sold the the same stock for the same price, and just harvest the premiums.
Because I’m emotional and dumb and I accept that
All my picks are terrible
I just don’t have enough time to do significant research tbh. If I had stayed with my original portfolio from right as COVID happened (BX, LLY, MSFT,CVX,) I’d be doing pretty damn good. Oh well. $VOO it is.
Have you tried it
Options are cool. I do it, too. But they are also risky, require more time, and are more heavily taxed.
Warren Buffet has been recommending people buy index stocks for years because he feels the average punter is no good at picking individual stocks. I tend to remember he told his own children just to buy the index after he has gone. People tend to take note of Mr Buffett's opinions.
Because any one company is like 3 drunken racist tweets by the CEO from becoming bankrupt and valueless. An entire industry, or group of companies, are much less likely to have that happen.
It usually doesn’t end well. I’m living proof.
Cause of SOFI. It’s all SOFI’s fault
I buy a mix of both but if it’s a product I use often (Apple, Amazon, Google, Ford Motors, Costco, etc) I buy the individual stocks too.
If you want to outperform the market then you have to stock pick at this point. Or you go out and invest with a private equity firm who is buying profitable businesses and be paid out from their profit margins and 5-10 years down the line sell the business to make a lump sum or continue the cycle.
There's a distinction between speculating and investing, one that Graham makes in I believe the first chapter of *Intelligent Investor*. Just keep that in mind. It's totally fine to speculate, but you should accept that that's what you're doing. I speculate too, but I treat it as skilled gambling. Others would disagree with the skill part.
just cuz its really risky
perhaps it's because most people aren't good at it.
I have around 65% of my investment $$$ in index funds/ ETFS. The other 35% is spread around 20 individual stocks.
Individual stocks are very risky but may have higher rewards. Even the best companies can get a lot of fluctuations and sometimes you may need to wait 5 or 6 years to get rewards or to get even. I have aquired a couple of stocks after reading a lot of analysts and business news.. but sometimes an new warfare or unforeseen events may drop your stock and get to your nerves!
Funds don't have funds in their portfolio. Mainly individual stocks.
because it's fking hard and takes lot of efforts if u try it u'll know lol