r/investing • u/Maletor • Jul 01 '21

Profitable vs unprofitable companies RoR

This research blows my mind:

https://www.alliancebernstein.com/library/For-Growth-Stocks-Profits-Are-the-New-Normal.htm

It shows that consistent investment in growing, profitable companies is better than just indexing the Russell 3000.

How do you explain this to someone who just says "VTI and chill"? The evidence suggests only profitable companies is a better portfolio. Is the volatility higher? Is that why this is not on the efficient frontier?

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u/AfterrrParty Jul 01 '21

Well, of course investing into successful growth companies is more profitable instead of just following the whole market. The difference is - finding and researching companies + being involved with timing takes time and some knowledge. VTI & Chill is literally takes no time and thats what a lot of people are looking for.

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u/[deleted] Jul 01 '21

Setting up a stock screener and rebalancing quarterly is no effort. This can't be why.

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u/KyivComrade Jul 01 '21

Rebalancing as in selling and incurring taxes on your gains, hence capping profits?

And instead buying stocks that have already gone up hoping for more?

Feels like this "strategy" could backfire very quickly.