{{ Most of the top performers are tech companies, headed by Apple, Nvidia and Microsoft. What’s startling is that both Tesla and, if only briefly, SpaceX, two of Elon Musk’s companies, have muscled their way onto that list of superb performers.
While these elite stocks churned out spectacular returns, more than 96 percent of the stock market did virtually nothing for investors over long periods. This vast majority of stocks couldn’t even match the 3.3 percent average return of one-month Treasury bills — basically, the return you could get month-by-month over those 100 years, without taking any appreciable risk. }}
That’s why owning a low fee index fund gives you the proverbial “free lunch”. Even the best stock pickers fall short of identifying the 4% that out perform.
Why startling? Or better yet, when startling? I would say before 2020 it could have been startling but when Sandy Munro disclosed how Tesla was reinventing making cars it was disruption in the making and incumbent car maker in for a ton of hurt as predicted by Clayton Christensen’s The Innovators Dilemma, copyright 1997. Even today Tesla bears are focusing on traditional but irrelevant data. One relevant factoid is Tesla’s adoption of Agile Management based on…
GoogleAI:
Agile software development was formalized in February 2001 when 17 software practitioners met in Snowbird, Utah, to draft the Manifesto for Agile Software Development. [1, 2]
However, the specific methods that make up Agile (like Scrum, Extreme Programming, and DSDM) were developed independently throughout the 1990s
Joe Justice was hired as an Agile consultant by Tesla in 2010 and later got a job there.
Joe Justice: Tesla’s Agile Development | Agile Hardware Development at Tesla
Most MBA would have missed it all stuck in $SS & ¢¢¢!
All the above was freely commented online. Tesla is a software company that happens to make hardware, like Apple!
Over a 20 year period, almost a 1/3 of public companies will outperform the index. I wonder if this is more in line with the reasonable holding period. However, your point is well taken. I think the problem is not just that a minority of stocks outperform the index it is that most investors lack several other key factors.
Patience or a window long enough to let the winners run big. With that, there may be long periods where some positions do nothing, even though the underlying business is still doing well.
They lack the risk tolerance (which is understandable) to accept that concentration is inevitable and a few businesses will end up as the large portions of the portfolio, in order to outperform.
They err on the side of caution and hold too many rather than a select group of businesses that represent the very best opportunities.
They equate increased risk with increased return, when often it is just increased risk
Dollar cost averaging into the Index is a less involved process than valuing individual businesses. Although, you could have bought the very best businesses at interim highs and still done quite well.
This is something I cannot back with data but I think that overtrading is the investor’s worst enemy. My personal data seems to back this assertion. If true then maybe the best strategy is to never sell. What goes broke, good riddance. What remains, keep adding all the time, whenever we have cash available. Combine that with low risk covered call selling. Combine the above with Peter Lynch style stock picking, buy what you know. In my case it would data processing technology.
Yep, my 2 largest positions at the moment, Corning and Eli Lilly, are stocks I’ve owned for over 25 years. Corning made the glass for Thomas Edison’s light bulbs, and Eli Lilly is celebrating the 150th anniversary of its founding this year.
Use what under performs to match with the sale of your winners to fund tax-free portfolio withdrawals. Over time, your portfolio will consist of just winners with a microscopic cost basis, and eventually you’ll have to pay some taxes like I did on that Avis short squeeze back in April.
Why not? But, as a non-resident alien I don’t pay capital gains taxes, only a 15% withholding tax on interest and dividends which I avoid. Option premiums are capital gains/loses.
