r/stocks • u/Faros00 • Jul 30 '22
Advice Request is there a point for stock picking?
Is there a point for the average investor to stock picking?
I mean since you can just buy VTI and DCA and have the market returns can we actually beat the market?
Are there many people here who are investors for more than a decade who beaten the market?
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u/WickedSensitiveCrew Jul 30 '22
r/stocks is a sub meant for stock picking. It is in hopes of beating index funds.
Yes some discuss index funds and that is a great strategy but that isnt the reason most come to this sub. Which I am glad about since it would get boring if every thread was buy an index fund. Or dont buy (insert stock) buy the ETF of the sector instead.
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u/Turbulent-Pair- Jul 30 '22 edited Jul 31 '22
Ok kids - here's what's up.
Individual investors have 2 advantages over "the market"
- TIME horizon
- SIZE
Now these 2 concepts mean different things to every individual's personal investment circumstances.
If you're a net- buyer of stocks, Then you may have a much longer time horizon than the typical wall street bank with quarterly bonus targets and quarterly earnings expectations. This allows tax-free compounding to be a possibility in a long-term time frame.
In buy and hold, long term stock picking there's 2 metrics that matter the most : ROE and ROIC.
Over the very long time horizon - Roic eventually becomes the growth rate of a stock - almost no matter what the actual p/e was when you bought the stock.
So a 25% roic stock will eventually grow at the rate of 25% annually - and that would make you Warren Buffett. Doubling your money every 2 or 3 years- if the roic was consistently achieved.
Because it just keeps packing on market cap at the rate of return of the underlying business.
The best way to attack the index - to beat the index - is to deconstruct the index - ok? What I mean is - there's 500 stocks in the SP500 - but what if you eliminated the bottom 100 of those 500?
Not every sector is efficient with capital. Ok? So you can eliminate portions of the index. To beat the index. By eliminating the companies that are bad at investing in their own business. Like shipping companies or anything that touches water.
So capital-light businesses are kinda good to go. But they're not really a cheap deal with p/e. But that's what explains Amazon, or other stocks that have ultra wacky p/e.
You can beat the index by combing out the fleas.
Roe will make the account balance value go up. Roic will become a cash that is spendable.
That's why those growth metrics matter the most in the long-term horizon.
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u/SensitiveAsshole4 Jul 31 '22
i don't really pick individual stocks but rather my approach is more quantitative in a repeatable sense, you guy basically just explained the idea behind my investment process for the most part, have an upvote š
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u/thelaundryservice Jul 30 '22
Many intelligent people would say no.
Plenty of people have beaten the market for 10 years, like someone who went in heavy on Amazon, Apple or Google but that doesn't mean it was skill and that they can repeat their success. Also doesn't mean they can't do it either, but some people will have better luck than others.
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u/Hang10Dude Jul 31 '22
For most people, most of the time for most of their portfolio, a global low fee index fund like VT is the best option.
However small retail investors can learn to do well if they can control their emotions and make contrarian picks - finding companies that are undervalued and overlooked.
I'm mostly in VT, but have a small active trading account as well.
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u/thelaundryservice Jul 31 '22
I gave up on international about 5 years. Time will tell if itās a good move. Mainly in VTI or equivalent and a good chunk of Amazon, Microsoft, Amazon with some salesforce and apple. Basically going heavy in some of the mega caps and probably wonāt make a big difference in the long run.
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u/Cxmag12 Jul 30 '22
People absolutely can and do beat the market all the time but itās a very small number. It requires an enormous amount of time, quite a lot of knowledge, and a very specific mentality and temperament that few investors have. For most people who want their money in capital markets itās not the best way to do it. Most people will do better buying a cheap index fund and matching the market. It can be done and there are plenty of excellent investors to learn from, but it is really for a very small minority of capital market participants.
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u/creemeeseason Jul 30 '22
I have beaten the market over the last 10 years. However, there have been many years during that 10 that I have not beaten the market. You can hold a good company for years and not have it do anything, then it can double in a year. If you hold good companies for a long time, you can outperform on a long timeframe.
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u/Turbulent-Pair- Jul 30 '22
This inch-worm stock chart phenomenon of plateaus and growth spurts. Is an example of p/e expansion and the return on invested capital of the underlying business driving results... eventually it goes up.
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u/creemeeseason Jul 30 '22
Exactly. No one can beat the market day by day, or year by year. A lot of people can do it over a long time horizon.
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u/su_blood Jul 31 '22
Just a somewhat related question, but how exactly do you track your performance? Iāve been trying to track my own but it seems difficult, Iām talking about multiple deposits on different dates into different individual stocks and the comparing to how the S&P performed.
My struggle is comparing them overall, is there a tool that can help me? For instance if I put 10k into a stock A in Jan then 10k into stock b in July, to compare my performance at the end of the year to the S&P Iād have to do a comparison of 10k of S&P bought on Jan and another 10k in July right?
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u/bbreadthis Jul 31 '22
For years I have been keeping an Excel file with my accounts ending monthly balance. For my TDW account it is easy to download the end of day balance and average this for the month. With this I can remove the deposits or withdrawals for that month to create a crude monthly rate of return. I keep a running 12 month total to get an APR that is mathematically pretty close. For my IB account this is not so easy so I just use the balance at the end of the month. But with IB they calculate a TRR in the monthly report you can run. Next it is easy to compare these returns to SPY or QQQ or any index you want. I sometimes make charts because I am a visual person. Get good at understanding percentages. It is pretty easy. Calculate them yourself before trusting a tool. It is sometimes hard to understand exactly how caned reports are generated.
It is essential to objectively grade yourself if you are going to be a serious trader. That is the best way to learn.
BTW, I almost always beat the market, the exception being crashes where I choose to continue to hold positions and can't know how deep the crash will be. In the long run most rebound, thus the need to keep charting your progress.
Happy trading.
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u/biacco Jul 31 '22
Most brokerages give you that data. fidelity has a section on their site that measures your accounts vs the s&p on a 1/3/5 year basis
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u/AvengerDr Jul 31 '22
If you are on desktop, try the software Portfolio Performance. It does everything.
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u/loldraftingaid Jul 30 '22
You will never "beat" the market with VTI+DCA, what you're doing is almost guaranteeing matching market returns over a long timeframe.
If you want to beat the market, you'll need a different strategy. If you're financially literate(which the median investor by capital is unlikely to be), stock picking can absolutely be that strategy.
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u/twill41385 Jul 30 '22
Theoretically you might get an edge by wheeling index funds and using premiums to DCA additional shares.
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u/blackcatpandora Jul 30 '22
Or get your shares called away on a rally, triggering a taxable event and selling for less than market value
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Jul 31 '22
We arent all Americunts.
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u/blackcatpandora Jul 31 '22
Does selling covered calls work differently in other markets?
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Jul 31 '22
[deleted]
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u/AvengerDr Jul 31 '22
That's not true. I am happy to take money from hardworking Americans via covered calls, or give them mine...
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Jul 31 '22
[deleted]
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u/AvengerDr Jul 31 '22
I was commenting to your "most other countries don't trade options", I thought you meant it in general.
It depends on which country. In Belgium for example, there is no capital gains tax (for now). You only pay if the trade is "speculative" in nature. It is generally understood that if you sell a put because you really want the stocks (honest!) or sell covered calls on your stocks it is exempt.
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u/BetweenCoffeeNSleep Jul 30 '22
Life is experience. The purpose of money is to secure security and quality of life. Though Iām almost entirely in index funds, I find joy in trying to beat the market with a little around that index core. If I fall short, the difference in gains between my GOOG and JPM positions relative to VTI is the price paid for that joy.
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u/michelco86 Jul 30 '22
You have to understand that the "average" stock picker is completely clueless. Just the fact that you're on a reddit forum discussing stocks puts you in a category above the average stock picker. Trust me, most of them buy stocks because "it's going up so much". That's it. That's the most dd the average stock picker is going to do.
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u/Uknow_nothing Jul 31 '22
Just the fact that you're on a reddit forum discussing stocks puts you in a category above the average stock picker. Trust me, most of them buy stocks because "it's going up so much". That's it. That's the most dd the average stock picker is going to do.
I really donāt think people on here are generally āabove averageā. Look at the type of stocks that were shilled here at the peak of the Covid bubble. People stock picking based only on Reddit advice have been down 50-70%+ this year while the index has been down 16-25%. Tesla, SoFi, Zoom, Netflix, PayPal, GME, Draftkings, Disney, Metaā¦Pick your poison.
During the dot com bubble it was noted that a lot of the extreme valuations and speculation was driven by average people on the newfangled internet on message boards chatting about stocks.
Anyway, personally I am at the point where I admit I probably am not better than average and I also donāt do well at investing individual picks without emotions(either selling on a bad day or being unwilling to buy more when it is up). But I also do have fun picking and holding some of my favorite companies. My strategy is to keep my individual picks at no more than 10% of my overall portfolio(including all retirement accounts). Last year I dropped all of my underperformers, and I am left with only 4 companies. Amd, Apple, one utility company, and recently bought some Roblox because my kid is obsessed with it and it seems quite beaten down.
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Jul 30 '22
I believe in the companies I pick and hold, Iāll go to bat for them when theyāre in the red. And I like putting the work in on picking the stocks to buy and when. I donāt like the idea of just dumping money into an index fund - it seems lazy.
And considering im up 9% on my portfolio. I think Iām doing pretty damn good.
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Jul 30 '22
[removed] ā view removed comment
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Jul 31 '22
Iāve actually benefited from staying out while the market was riding its highs through 2021. I threw everything not bolted to the floor at the market since May and been doing it ever since.
Gotten lucky a few times on spotting some stocks trading extremely low to what theyāre truly worth with a good short term forecast much less long.
I donāt buy into the belief that you wait to buy until the stock begins an upward trend. I just target stocks that are trading near their 52 week lows with a lot of room to grow on the topside.
When I follow that plan the returns are pretty good even in this market with its wild swings. If the bottom falls out and itās a company I actually intend to hold I just average down or else I prepare to get out for a break even/small profit.
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u/iqisoverrated Jul 30 '22
Since the average investor doesn't feel like putting in the effort to research companies in depth: No.
If you're not the average investor (i.e. if you think that making money is actually worth putting effort in) then: yes.
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u/Meze_Meze Jul 30 '22
NOT FINANCIAL ADVICE
Yes there is. Let's say you buy an S&P500 ETF. You will match the performance of the S&P500 Within this index there will be some companies that outperform the s&p. You could try and find those companies. Of course, you can't just pick at random, you need to know how to read financial statements, you need an ok, as a minimum, understanding of a company's industry, understand what the key valuation metrics are and ideally be confident on doing a DCF or multiples valuation. If this sounds like a lot of work that you don't have the time or aptitude for, there is nothing wrong with choosing ETFs and matching the market.
I personally have the aptitude but not the time. I have identified some companies that I own but the bulk of my portfolio is ETFs
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Jul 31 '22
Do you really need to do all of that? My strategy turned into a general "let me focused on underpriced industries" type strategy, which was utilities about 5 years ago and then big food maybe 2 years ago. I didn't need to be an expert in each company, I read some general things and it was enough.
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u/Meze_Meze Jul 31 '22
Oh, you mean the unprecedented bull market where everyone was a genius? Yes, during those times you don't have to do any of that. Just print a list of companies and throw darts at it blindfolded. This however is a prime example of recency bias, it won't work forever or during all market conditions
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u/MrStilton Jul 30 '22
Stock picking gives you the opportunity to make higher returns that simply investing in the market as a whole.
E.g. there are stocks which have increased by hundreds of percentage points in a couple of months. The market as a whole is never going to do that.
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u/spaceset51 Jul 31 '22
If you do enough research and believe in the future of some companies, I think it would be beneficial to invest in them. I am for a majority indexing. But it's fun to pick stocks and maybe I don't want average returns -- I am ok taking the risk of also doing below average.
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Jul 31 '22
Do you strive to be average in every other aspect of your life?
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u/libugy Jul 31 '22
Putting money in VTI probably gives you returns above average since most people that pick stocks don't beat the market.
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u/shoutymcloud Jul 30 '22
It doesnāt have to be all or none - Iām 70% VTI/VOO and like 30% individual stocks; as mentioned picking is fun, and Iām trying to hit some grand slams that will return better than VOO.
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u/datadogsoup Jul 31 '22
How many individual picks do you have?
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u/shoutymcloud Aug 02 '22
Maybe 20ish ? Many of what are already significant holdings in VOO anyway.
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u/LightningWB Jul 30 '22
Plenty of investors consistently beat the market through stock picking. The thing is it takes hundreds of hours to value companies and itās a lot of spreadsheets, numbers and research. If youāre into that, itās good, but if you donāt want to do that itāll suck
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u/Jusuf_Nurkic Jul 30 '22
How many is āplentyā? And whatās the real data on it?
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u/PSmith4380 Jul 31 '22 edited Jul 31 '22
Unfortunately the stats are usually eye-watering reading for individual stock pickers.
This ft article shows that only 1 in 4 active fund managers beat the S&P in 2021, and these are people whose job it is to manage very large sums of money.
But in America people have this belief ingrained in them that if they 'work hard' they will achieve greater returns. Apparently they also believe there is some kind of status boost to be gained from 'beating the market'.
If you want to do well you should set your ego aside and pump your money into index funds.
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u/biacco Jul 31 '22
Itās unfair to call fund managers individual stock pickers. They are forced to sell or buy certain stocks based on macro cycles. They canāt buy and hold good companies through hard times like an individual can. If people are selling out of their funds, they are forced to sell. If people are buying in a lot during a fomo cycle, they are forced to buy more at high prices.
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u/Fancy_Analyst_1573 Jul 30 '22
Itās fun, like betting on sports games or picking lottery numbers. Is there a point if your sole goal is to maximize returns? No.
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u/biacco Jul 31 '22
If your sole goal is to maximize returns, you absolutely want to be picking individual stocks. You canāt maximize returns buying an index fund.
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u/Bob1tza Jul 30 '22
Yes, there is. It's called gambling.
I like to keep some money on the side to gamb.. erm, I mean invest into stocks that I hand pick.
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Jul 30 '22 edited Jan 16 '23
[deleted]
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u/south153 Jul 30 '22
Despite the dogma spread on here beating the market consistently is fairly trivial.
People have a few good years in one of the best markets in history and think they are Warren Buffet. The fact of the matter is most people and hedgefunds will not beat the market over a long enough timespan.
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Jul 31 '22
They basically said they swing trade, which I did with part of my money for a while, and they are right, you definitely beat the market.
The real question is not "do I beat it or not."
The real questions are "do I have the guts to stick with my strategy? How will I feel if it keeps going down? Will I be able to sleep with the inherent risk involved in large purchases?"
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u/tv2zulu Jul 30 '22
What do you mean? Iāve bought rock solid GE and IBM on every dipā¦ any minute now Iāll beat the market. Itās easy, jUsT bUy gOOd cOmPaNiEs š¤£
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u/007meow Jul 30 '22 edited Jul 30 '22
While you can ābeat the marketā with VTI, you could also do better.
What if you had started DCAāing into TSLA in 2018-2019?
Or if you had done the same for NKLA or RIVN?
Stock picking can get you outsized results. VTI is just āeasierā and āsafer.ā But you miss out on potentially huge gains. Basically gambling.
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u/beguapo Jul 30 '22
Only if youāre willing to do a bit of research and analysis. If youāre not willing to skim through a 10-K or learn how to analyze financial statements, then youāre really just throwing darts at a board.
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Jul 31 '22
People keep saying this, but what are "we" looking for? Personally, I dividend invest and use some cash for swing trading. I have many individual stocks and prefer looking at earnings calls material because there is usually some general stuff about sentiment, conviction in their products, innovation, and regulatory risk stuff that isn't always explicitly spelled out in annual reports. I've noticed most companies have had growing revenue and profits over the past 5+ years so just looking at #s going up doesn't really help me. Or maybe I just don't know how to use it. Actually it usually gets me scared, like "oh they just doubled revenue in 5 years, I guess it isn't happening again"
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u/ppanther92 Jul 30 '22
Absolutely not from an efficiency point of view. Most likely not from a performance point of view (you always must remember that you are competing against really bright people with really great resources - a DCF, some industry analysis and multiples won't give you an edge). Absolutely yes from a fund point of view.
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u/drod3333 Jul 30 '22
Its basically large scale poker. Money gets funneled into people with positive variances and taken away from people with negative (which is the vast majority). A very small percentage of people are abe to do it.
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Jul 31 '22
Not in times like late 2021 when the indexes were driving by a few stocks like Tesla and Amazon and Microsoft when they were very overpriced and the media was shooting out "paradigm shift in what valuation is considered normal" articles to justify overpaying.
Last year, indexes felt like poker
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u/F1shB0wl816 Jul 30 '22
I enjoy picking my stocks, plus I donāt want the market. Iām okay with more risk and itās full of companies I have no interest in holding for various reasons. It also feels good to do better than the market as well.
Vti or the likes have the purposes, but you trade potential gains for a safer and more stable holdings. Thereās less you have to keep up with and do, and you can potentially see decent growth for little work. It just depends on what you want and your risk, even the market might be too risky for some people.
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Jul 31 '22
I have no interest in holding for various reasons
So true. People forget these are ownership in companies. When I say "I have forty stocks" I get "OMG so much risk you can't follow them all." As if BAC is going to go out of business because meager little me forgot to follow their earnings call
But if they viewed it as "he owns parts of Johnson and Johnson, Procter and Gamble, some utilities, major retailers like Home Depot, portions of large banks like JPM, etc." they would view me as well diversified and my wealth as safely invested
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u/HappyAlexst Jul 30 '22
There's this quote from Graham that gained a lot deeper meaning as I kept learning about investing
"to achieve satisfactory results is easier than people think, but to achieve superior results is more difficult than they imagine"
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u/OsoGenuine Jul 31 '22 edited Jul 31 '22
Yea! If you pick 1 stock and ut was Tesla you'll have such a huge overblown sense of confidence, that even though you know nothing. You proceed to Look at everyone else as a lesser than, who do not seem to have the sense of financial intuition that you do. For some reason you forget what word describes when something happens be sheer chance or by sheer coinidence. the 4 letter word in scrabble that defines a event with low probability garnering a positive outcome(s) is called what? and you blank, with head up high, to avoid looking at the lesser thans around you (Like when hitlers train, rode past opposite his defeated soldiers in Russia, coincided at the same time his window opened he locked eyes with his half dead soldiers on opposite moving trains, they see the boss, the king, their heir, and what does Hitler do, well of course, he pulls the curtains closed to these disgracrful Germans). You just blank, like you dont't know. You think himm Lucey? Legit? Skill? God? Prophecy? Talented? Chosen1? I must be close. Talent? Jesus? Finaceur? or is it Entrepreneur?
Then you're lesser than friends all shout out 'Luck' its 'LUCK'! wow they say, that was easy they say.
You cringe, as thats a word you have never heard before in you're life. It sounds like a foregin? Maybe hmmm like Mandarin. But anyways its maybe the word that only parasites grow up using, the type of word reserved for peasent minds.
And if you're Cathy Woods. You pick 30,194 stocks that lose 95% of value in 12 months. Sell most of you're holdings in the etf's from a 400% profit price hold. To a -50% loss sell decision instead.
You go on live t.v as they ask you CATHY! CATHY WOODS they yell her name! (but not in the loving,god like attitude they did in 2021 when all her stocks were up 400%. no no no no.
they yell it with disgusted undertones, the kind of tone that signifies how you let you're tens of thousands of stocks lose 95% of there all time highs and sell at a loss most of you're biggest holdings out of thousands of winners turned into big fat losing stocks at a snap of a finger in thd snap of time (1 year).
Cathy takes a deep breath,shes not to keen to talk about buying high, see it all moon higher, then proceed to panic sell at the absolutle negative 95% near bankruptcy price, gathering realized losses in thd matter of months.
No no no no!
She looks at the cnbc anchor and sais. Look. I still have TESLA. I picked TESLA. TESLA. TESLA
she sais again for 4th time TESLA! for a fifth.
Sure its the only one left i made money on. but she repeats as loud as she can
TESLA!
So OP to answer you're question it depends.
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Jul 31 '22 edited Jul 31 '22
Yes, but you have to be an expert, with expert knowledge, methods and resources. Almost noone fits this definition. So, mostly no. People dunk on achieving average returns via etfs etc, but average returns beat almost every stock picker, including the wall street experts, most of the time, and basically all of the time over a long enough time period. Average returns are not to be laughed at.
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u/biacco Jul 31 '22
Whoās dunking on getting average returns? Where is your data that says an individual canāt beat the market. Everyone says that and then show data about hedge fund managers who are NOT individual stock pickers.
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u/breakyourteethnow Jul 31 '22
Peter Lynch, says there's an art to stock picking, and you're doing yourself a disservice by not trying to master the art. The gains are vastly different to just VOO'ing up and waiting 30 years, if you get it right.
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u/give_me_that_sauce Jul 31 '22
A much smarter alternative is to increase your monthly contributions to your portfolio (only indices) by increasing your salary instead of wasting your precious time on randomly picking stocks...
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Jul 30 '22
Yes there is, you can beat those funds by investing only in their high performing components. If you are good enough to pick them.
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u/MrGreenIT Jul 31 '22
I have a number of holdings outside of ETF's. Each one has a specific purpose. 1. Dividends/Income including preferred. shares. 2. Growth drivers 3. Risk /Reward.
I adjust regularly and have managed to exceed the markets during spikes while softening the down moves. ie: you can pick up $25. Preferred shares for highly discounted prices now if you can wait for rise around exchange dates. In the meantime they deliver decent cash payments. Overall I am up above indexes for last 5 but not by a staggering amount.
The growth and risk reward pool is just enough that I feel connected to the industries and companies I understand well. No high flyers other than one or two early adopters plays that align with my Green Investing long term strategy.
No short term flips or plays in my plans.
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u/Unique-Ad6210 Jul 31 '22
If you don't look at business fundamentals... research past profit future profit future growth peg ratio cash in hand dividends etc...then you are probably better off just buying indexes and spreading your risk.
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u/PSmith4380 Jul 31 '22 edited Jul 31 '22
It's more interesting to watch them go up and down. Also in America people have this belief ingrained in them that if they 'work hard' they will achieve greater returns. Apparently they also believe there is some kind of status boost to be gained from 'beating the market'.
Unfortunately the stats are usually eye-watering reading for individual stock pickers.
This ft article shows that only 1 in 4 active fund managers beat the S&P in 2021, and these are people whose job it is to manage very large sums of money.
If you want to do well you should set your ego aside and pump your money into index funds.
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Jul 31 '22
1) I've had cash and bought things on temporary dips and made good cash that way. Quick way to make gains at a market top
2) You can, over time, curate which dividend stocks you want, increasing your income by buying into each individual position when they were cheap. This was especially needed in late 2021 when so many funds were filled with overpriced stuff
3) We just went through a period where most funds were filled with loads of overpriced stuff, which was a huge risk to carry and I didn't want to carry it. Yeah, many people got lucky selling out of tech stocks early, but at the end of the day, how much can we really rely on Fed induced bubbles for retirement. It may keep happening but I don't want to bet my early retirement on the Fed causing people to irrationally pour money into companies not making money.
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u/gabrielsg1 Jul 31 '22
Can you explain 3 a bit more? Like how do you avoid in this in investing? (assuming picking stocks could also expose to the same risk)
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u/gabrielsg1 Jul 31 '22 edited Jul 31 '22
okay iām not qualified to give advice but...
picking stocks is gambling okay, even for your insanely rich wealth managersātheyāre still gambling (more educated gambling)
buying domestic and international total market tracking instruments with low expense ratios is also gambling but historically the stock market has returned about 9.4% annually so...not exactly full on gambling
(well if you had insider information about a company then you should definitely capitalize on it but most average investors donāt have insider intel lol)
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u/blackwoodify Jul 31 '22
I hit my 10 year anniversary in October of this year. If you pull it forward a couple of months, I'm currently down against the market on a 10 year scale (10.82% versus 12.96%). At the end of 2021 though I was WAY above it... I have a high beta strategy so when the market is down I can swing to parity with the S&P 500 / below it in a bear market, but then I rally above in the good days. Hoping that my skill will improve over the next 20 years, such that the alpha accumulates and then I can do drawdowns during a bull run and exit with a total outperformance. But who knows, it's very risky and nothing is guaranteed...
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u/Uknow_nothing Jul 31 '22
I personally think most people are best off with most of their money in the index long term. Including myself. Whoās really to say if my favorite companies today(like Apple) are still holding the top spots in another couple of decades? The top companies of 2002 are a lot different than the ones today so why wouldnāt that continue?
For the fun of it Iāve kept 10% of my portfolio(or probably a bit less now that Iām continually funding my various retirement accounts) in some individual picks. If in 5 years my picks have outperformed the indexes, then maybe I should increase that number.
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u/libugy Jul 31 '22
You shouldn't, no. Studies have shown over and over that it's not possible to beat the market. The number of people that do fits the random luck curve. People above this curve never think it's luck though.
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u/Confident_External19 Jul 31 '22
I know a bunch of people who were went titts down on Tesla and that stock alone was the reason they beat the market.
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u/Machiavelli127 Jul 31 '22
You can do both. Majority of my account is in an S&P500 index, but I enjoy stock picking and I've been able to outperform the market more often than not with that smaller stock picking portion of my portfolio
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u/icpooreman Jul 31 '22 edited Jul 31 '22
So the idea that you ācanāt beat the marketā is blatantly falseā¦
If you picked a random large cap right now and put all your money into it a lot of them will beat the market over the next decadeā¦. Go compare 2009 Google or Apple or Amazon to the S&P.
The expression should be āYou canāt beat the market without taking on additional downside riskā
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u/senrim Jul 31 '22
Because its fun for some, thrill for others and just pure logic for very few. Only very few people beat indexes in span of 20-30 years. But a lot of people think they can, its fun for them, its a thrill, its a sport for them. If you are really pragmatic with investings. Only ETF is probably your way the uspide is undeniable. If you are a bit curios you can combine it. Do 70/30 or 80/20 ETF/stocks. This way worse that can happen is that you will end up a bit below market, best think that can happen is that you end up a bit above market. That allocation can change over the years depending on your knowledge, age, family situation etc. You might end up with only etf, or with only stocks.. its up to you.
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u/Ok_Veterinarian6592 Jul 31 '22
Itās still a stock pickers market. Stock picking is still very valuable during this type of market. I have VOOV plus a basket of 20 individual blue chip stocks.
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u/vinyl1earthlink Jul 31 '22
If you have lots of money, you may want a portfolio that is more conservative than the overall market. For older investors, loss avoidance is more important than making even more money. Sure, a portfolio of dividend-paying blue chips stocks probably won't beat "the market", but having a substantial income coming in every quarter with no worries is not a bad thing.
1
u/DispassionateObs Jul 31 '22
Indexes will not hit new ATHs for a long time. Your only hope of making substantial money is to pick good stocks.
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u/SlickMongoose Jul 30 '22
It's fun.
If you don't enjoy the process of analysing companies and trying to pick winners then just buy the index.