Comment by tombert 3 days ago
This doesn’t surprise me in the slightest.
Most of my investing is just in passive S&P index funds, but I do occasionally buy individual shares.
Sometimes I make decent money, sometimes I lose money…turns out I consistently do worse than the S&P long term.
I treat buying individual shares as yuppie gambling at this point. It can be fun, but it’s usually a bad strategy.
> That is, not just the companies, but also the market, the industry trends, etc.
That sounds like exceedingly bad advice.
Eg I work in software (like many people here). So my career itself already heavily exposes me to ups and downs of that industry; but it's also the industry I know best. The advice you quote would see me increase my already outsized exposure to that industry ever more.
Diversification is the only free lunch in finance. Your advice rejects it.
> The problem with most ETFs is that you'll still be investing in a bunch of dud companies, whose only reason for staying in the market is by virtue of being big (think HPs and IBMs, for example).
Feel free to use the gambling money part of your portfolio to short them.
And since HP and IBM etc are publicly traded, there are already lots of short sellers around making sure the prices stay reasonable.
The problem with ETFs is that many of them have crazy management fees.
Don't just blindly buy an ETF that fits your investment goals. Many of those bespoke ETFs have 1%+ management fees.
You can look up how even a 1% fee can gobble up piles of money over years.
That's why I am partial to the Vanguard funds. If you look at VUG and VTI and VOO, the fees are on the order of ~0.03-0.04%.
I know that passively-managed ETFs aren't necessarily "optimal" (as your parent comment mentioned, there's a risk of them having a few duds there for legacy reasons), but I think the value that they provide come down to the fact that they're automatically rebalanced and diversified, and 0.04% seems like a pretty reasonable cut for them doing that for me.
To your point though, even Berkshire Hathaway invests in VOO and SPY: https://www.morningstar.com/funds/spy-vs-voo-which-warren-bu...
I think there's value in having things diversified and rebalanced automatically, especially if you don't have any confidence in your own ability to do so. Yes, you sometimes get stuff that's overvalued and thus over-represented, but in theory if the stock tanks the portfolio will be rebalanced and thus become a smaller percentage of the total holdings.
> I treat buying individual shares as yuppie gambling at this point. It can be fun, but it’s usually a bad strategy.
Naw, that's boomer gambling.
Options are yuppie gambling.
I thought that was shorting biotech stock days before clinical trial results get announced?
For extra flavour, also invest solely using loaned money, preferably a student loan that never goes away!
> I treat buying individual shares as yuppie gambling at this point. It can be fun, but it’s usually a bad strategy.
I would actually recommend the opposite - buy shares of a few companies that you know exceptionally well. That is, not just the companies, but also the market, the industry trends, etc. Charlie Munger recommends holding 5 stocks at max, while Peter Lynch suggests industries that are tangential to your work and daily life. Both solid advice. Revisit the list every year, and you'll already do better than most of the blind duds investing in the S&P500 (which arguably contains a lot of duds).
The problem with most ETFs is that you'll still be investing in a bunch of dud companies, whose only reason for staying in the market is by virtue of being big (think HPs and IBMs, for example).