What gives? The data ultimately points to one of the market’s most overlooked yet most dangerous realities: The effort to beat the market often leads to the ill-advised decisions that cause even most professionals to underperform it. That’s not to say it can’t be done. It’s just to point out that, statistically speaking, it’s darn difficult for most folks to do.
Think results, not entertainment
But you just don’t like funds? Or you love the idea of winning big on an individual stock so much that you just can’t bring yourself to allocate the bulk of your capital to admittedly less-sexy investments like an ETF? Fair enough. A simple solution is allocating some of your portfolio to exchange-traded funds with multiyear holding periods, and using the rest to pick individual stocks.
Just for the sake of discussion, though, ask yourself this tough question: Is your stock-picking effort actually moving you toward your goal, or has it devolved into a form of entertainment? Exchange-traded funds aren’t exciting, to be sure, but they sure do get the job done. The key is not waiting too long to get started.
Just something to think about.
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