This quote form MathJak's reference shows why this guy and everybody else who proves why you can't make money with individual stocks is wrong.
First, let’s talk individual stocks, even though it is hardly worth our time. What are you thinking when you browse through Value Line’s stock summary? That you are the next Warren Buffett[sic], and that you are going to hunt down the top performing companies and turn yourself into a millionaire next door?
There is one little problem with this method. It doesn’t work, and the reason why it doesn’t work is that everyone else is trying to do the same thing, and as a result, you and all your like-minded Wall Street millionaire-wannabe buddies bid up the price of these great companies to the point that, collectively, you are paying a lot more for a dollar earned than you would for a company that no one wants to own.
So "everybody" is looking for bargains? I don't think so. A huge slug of what is traded is in index ETFs . A huge slug of what is held is in ETF and mutual fund indexes. Buy side research has been gutted at many firms. Some hedge funds do it- others mostly make macro bets.
Likewise, the above comments from forum members show that individual stocks are an aberrant approach that people feel vulnerable about mentioning. "Oh sure, I own a few, but only a few and I realize it's just hormones." Like, "OK, I admit I toked, but I didn't inhale." Or, "Bless me father for I have sinned against the 6th Commandment, but only alone, never with others."
I feel that it is much safer retired or not, to have >=50% in TIPS or other CPI indexed bonds, and what is left in carefully chosen, well financed businesses with strong business franchises, low cost advantage, or et., etc. It wouldn't hurt if a good portion of these paid meaningful and growing dividends.
It is true that in a statistical sense one is not “rewarded for choosing individual stocks”; but he can be rewarded for choosing individual companies well.
Of course this is not for a coffee table guy. It's for a man or woman who enjoys the process as well as the outcome of investing, and realizes that it takes time and effort to achieve success.
Ironically, probably the most rational use of index funds and ETFs is in market timing, where one is making a forecast for the whole market, rather than trying to find a well financed company with good and secure cash flows.
Ha