Stock picking or indexing

We are indexers mostly. All but 16% of our money is in either index funds or cash. When we first started investing, I tried my hand at picking stocks. Only one turned out to be a winner and we still have it, and it is the only individual stock that we own. I realized that I don’t have the knowledge, skill, discipline, or interest to try to pick companies to invest in. I was simply lucky with that one stock.


Considering that three out of four investors underperform the market, indexing is a good alternative for the risk averse.

But consider that not all indexes are the same, buy the winning index if you can stand the volatility. NASDAQ is often referred to as ‘tech heavy’ and tech tends to be growth stocks as opposed to S&P 500 which are more value stocks. Here is a 45 year comparison.

The time to switch is at the bottom of the next bear market. “Chasing yield,” switching to the current winning index, is a risky, losing proposition.

The Captain

o o o o o o o o o o o o o o o o o o o o

This applies not just to Mutual Funds but to all investors, 3 out of 4 underperform