And yet, like Don Quixote, you can't help yourself but "tilt at wind mills" in each and every thread that dares to pick individual stocks. We get it. Stock picking bad. Passive indexing good.
Well, facts are stubborn things. It is not a matter of good and bad, it is a matter of what has been proven to be successful and what has been proven to be unsuccessful. We can go back farther, but Michael Jensen's 1967
Journal of Finance paper on stock-pickiing funds concluded this:
"The evidence on mutual fund performance indicates not only that these 115 mutual funds were on average not able to predict security prices well enough to outperform a buy-the-market-and-hold policy, but also that there is very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance." Since then the most accessible research is the semiannual S&P SPIVA reports, which show that stock pickers on average underperform and the S&P Manager Persistence reports which show that winning as a stock picker is simply a matter of luck. I recommend that you read a few of them.
Some people come here to learn, and I think I is important that they learn from facts, not from anecdotes. There are always plenty of anecdotes about the winning trades, but few people post their failures. It looks so easy ...
FWIW, I used to believe the stock picking myth, too. In fact my first real investing effort in 1971 or 1972 was to do Fourier transform analysis of stock price series. It failed of course, as do most of the stock picking schemes. The few that succeed are quickly arbitraged away, so are not much use either.
p.s. I did a semi day trade yesterday. Bought $OCUL @ $9.20 in yesterdays pre-market, sold it today @ $11.10 today for a 20.6% profit (2 days). How? Because as an individual, I don't need to deal in big sizes like the funds do. The news was already out, it was up in pre-market. But I felt that when the market opened, much bigger players would be jumping in due to the news...and they did.
Good for you. Pipsqueek midgets like us do have a couple of advantages: First, our tiny trades do not move markets. Second, we don't have the cost burdens that professional stock pickers must bear. But we have disadvantages too, the most important of which is that we have very inadequate access to timely information compared to the professionals.
In the summer of 2018 I was developing my Adult-Ed investing class and spent an hour or two with the local TDAmeritrade branch manager. At that time, their strength was serving the pipsqueeks; day traders, etc. Towards the end of the conversation I asked her how that contingent had performed in the prior year (2017). There was a long, embarrassed pause, and then she said "One and a half percent." In 2017 indexes were up 20-40% depending on which one you picked. And I don't think her one an a half percent really tells the whole tale because it couldn't have been adjusted for survivorship bias. So the net result of individuals' stock picking was almost certainly negative in an extremely strong market year.
But hey, I'm as greedy as the next guy. If you have facts or research that contradicts the consensus over the last half century I would love to see it. Nobel prize winners Jensen, Fama, and Markowitz would probably also be interested.
