Why it’s so hard to pick stocks

[dennis thompson]

I follow the stock market pretty closely ( my wife says too closely). I was reading an article in Barron’s in which Aswath Damodaran, a fairly well know academic stock market guru, said it’s time to sell Nvidia, as many of you know, a very hot stock.
I own a tiny position in the stock so I decided to look at his very interesting website. In it he has a blog about Tesla. In that blog he tells how he sold Tesla and proceeded to watch it go up by a factor of 10 times.
I don’t mean this thread to demean professor Damodaran, who knows at least ten times more about stock picking than I do, but to simply point out how hard it is to pick individual stocks. At this point most of my investments are in ETF index funds and I plan to continue this investment strategy.

[Ron Citerone]

Just because he knows 10 times more about stock picking than you do doesn't mean picking individual stocks is the way to go for most people. Low cost indexing and a mix of stocks bonds and cash along with dollar cost averaging over time is a better approach IMO. I do own a few individual stocks just for fun but it is such a small percentage. I don't see how the average Joe can know enough to put a high percentage in individual stocks.

[Stan Calow]

There's a difference between investing in companies, and speculating on share prices.

[roger wiegand]

A balanced portfolio of very low cost index funds will outperform even the best stock pickers (Warren Buffet excepted, perhaps) almost always over a reasonable investment time frame. Individual stock picking is basically gambling, a couple people will get lucky, the vast majority will not. Those who do the research, buy sound companies and hold for many years are much more likely to be "lucky" than those who buy and sell frequently-- the transaction costs kill returns.

That said, I used to keep a "play fund" with a small fraction of our assets to see whether I could outdo the market. It did OK (not substantially better than the funds), but was a ton of work that ceased to be fun after a while.

[George Yetka]

Insider trading makes it quite a bit easier. Im not good with money, luckily my wife takes care of it. I usually invest in tools and ammo

[Ron Citerone]

That said, I used to keep a "play fund" with a small fraction of our assets to see whether I could outdo the market. It did OK (not substantially better than the funds), but was a ton of work that ceased to be fun after a while.

A point well made. I was musing this morning how in retirement now I have too many irons in the fire. Woodworking fishing family (4 grand kids) never ending cottage renovation social life. I would rather go the balanced portfolio route than spend much time studying corporations.

The "Bogle approach" has served me well.

[Keegan Shields]

Why would someone who is a “professional stock picker” freely share that information with you? Once everyone knows the secret insight, the advantage disappears.

Professional stock pickers are called hedge funds, and they don’t share their info with anyone. Most also don’t beat the market over the long term. Except for Bernie Madoff :).

[mike calabrese]

I spent half of my money on women, parties , and toys, the other half I just wasted:eek:
calabrese55

[Malcolm McLeod]

Why would someone who is a “professional stock picker” freely share that information with you? ...
'Why' = likes, shares, comments, followers, subscribers, patreons, ads, revenue. We live in a new world. Someone in another thread pointed out a woodworker made more money on their YT of a table build than they ever thought of making from selling the table. Surely Mr. Professional S. Picker can figure that out too.



I spent half of my money on women, parties , and toys, the other half I just wasted:eek:
calabrese55

...and you didn't invite me? There IS power in group buying.

[dennis thompson]

Why would someone who is a “professional stock picker” freely share that information with you? Once everyone knows the secret insight, the advantage disappears.

Professional stock pickers are called hedge funds, and they don’t share their info with anyone. Most also don’t beat the market over the long term. Except for Bernie Madoff :).
He a professor at NYU Stern school of business, not a professional stock picker. As an educator, if you look at his website , you’ll see a wealth of information he gives out for free.

[Keegan Shields]

Exactly - I think the phrase "if you aren't paying for it then you are the product..." generally rings true.

Picking individual stocks for anything other than fun is unwise for the casual or semi-pro investor.

[Keegan Shields]

Its great to learn the fundamentals that he is teaching - that should reduce your downside risk from basic mistakes.

However I doubt you will gain any advantage over the market by using publicly available information. Its really hard to out perform a low cost ETF.

Hedge funds do wild things to gain non-public information on individual companies. It takes a ton of time and effort, and I'm guessing there are lots of dead ends.

[Thomas McCurnin]

The problem is that the value/worth of a company one is investing in has some but not an overwhelming correlation to the stock price. For example, no one can predict whether money managers will suddenly invest in a company and drive up the stock price over a week.

[Lee DeRaud]

The problem is that the value/worth of a company one is investing in has some but not an overwhelming correlation to the stock price. For example, no one can predict whether money managers will suddenly invest in a company and drive up the stock price over a week.
Yup. There's also the phenomenon where a company's stock price goes up or down, sometimes by a stupidly large amount, based on whether some periodic metric matches a number some analyst pulled from a nether orifice 6-12 months ago.

[David Dockstader]

Or, as Yogi Berra said, "It is difficult to make predictions, especially about the future."

[Michael Weber]

Professor Damodaran in the OP’s comment must have sold his Tesla shares the same time I did. The factor of 10 is not an exaggeration.

[Patty Hann]

And then there are the Reddit groups like r/wallstreetbets and we all know what they did with GameStop

[Jerry Thompson]

Amen to that.

[mike calabrese]

'Why' = likes, shares, comments, followers, subscribers, patreons, ads, revenue. We live in a new world. Someone in another thread pointed out a woodworker made more money on their YT of a table build than they ever thought of making from selling the table. Surely Mr. Professional S. Picker can figure that out too.




...and you didn't invite me? There IS power in group buying.

You are in I am about to start enjoying the third half :rolleyes: Lets make it rain
calabrese55

[andy bessette]

Why would someone who is a “professional stock picker” freely share that information with you? Once everyone knows the secret insight, the advantage disappears...

No. Not true.

It is supply and demand. The more investors he can convince to also buy, the more the price will rise, for his shares and theirs. That is why you want to buy when the stock's price increases along with increasing volume (upward momentum), preferably while the general market is also bullish.

[Tom Bender]

Buying a rising stock is easier than selling one. But you haven't made any money till it's liquid again.

[Kent A Bathurst]

I spent half of my money on women, parties , and toys, the other half I just wasted:eek:
calabrese55

Close - My understanding that the legendary George Hurst, of Hurst shifters fame, "retired" at some point and basically disappeared for several years. He showed back up in the go-fast and racing business.

He was asked "why?"

"I'm broke. I need the money"

"You were filthy rich. What happened?"

"Most of it I spent on booze, babes, and boats. The rest of it I just wasted"

[Keegan Shields]

Maybe. The pump-and-dump is as old as investing.

Seems more likely to me that he is making money on book sales and consulting gigs like most business academics.

[Bill Dufour]

My father retired and bought some stock in the power company that supplies Reno Nevada. He and my mom would go to the annual meeting in Reno and have a little vacation. Free catered lunch after the meeting. Toured the college campus, river parks etc not just gambling. This was in the late 1970's early 80's.
They noticed the mechanical slot machines were slowly being replaced by electronic ones. He had bought a commodore computer and stock instead of apple when he retired because it was a better machine. So he bought stock in Bally, one of the companies that was making electronic gaming machines. Just as indian casinos became legal and other states legalized gambling. The same was happening world wide and they all bought Bally machines.
They invested 1% of their portfolio and it returned 100 times the investment in just a few years.
I bought clorox at the start of the pandemic and nothing happened. Blue apron home delivered meals lost money. I have ETFs now.
Bill D

[Jim Becker]

My opinion is that for the average person, trying to invest in specific stocks is a difficult and risky thing, especially with the level of volatility caused by "short term thinking" in today's market. "Back in the day", one could do relatively well with single stocks, especially large, known companies like the Itty Bitty Machine Company, etc. I had some successes long ago in that respect, but those days are gone. At this point, zero or very low cost mutual funds at whatever level of risk balancing is comfortable/appropriate is what I'd tell anyone to consider and it's how I handle my own money. Over time, this has done very well for me...important because I'm now partially living off those investments.

[Edwin Santos]

$.02 here - there are no easy answers or free lunches.

Passive low cost ETF investing is a sound strategy, but you still have to evaluate your ETF choices carefully.
For example, some are cap weighted, in which case the fund will be disproportionately invested in a handful of super large cap companies which is exactly the type of risk some are trying to avoid.
By way of illustration, I own some of the NASDAQ 100 tracking ETF called QQQ. It's done well for me over the past 10 years. It holds 101 positions in total. But being cap weighted, the top 6 comprise 50% of fund and the other 95 comprise the remaining 50%. If any of those top 6 positions take a dive, the fund will be disproportionately affected, so the risk is not as spread as you might think. However, as it happens the past several years have been very good for those 6 super large cap tech companies so this particular ETF has had way more momentum than an equal weight ETF. But it could have gone the other way.

On the other hand, an equal weighted index that is super broad can actually become over-diversified which presents its own problems. Namely the marginal loss of expected return is higher than the marginal benefit of reduced risk. Think of it as too much return is being canceled out by too much diversification. Some of these ETFs will have trouble gaining momentum even in a bull market.

Again, not making a case against ETFs, just making the point that your choices and your due diligence are still very important.

[dennis thompson]

Well, Warren Buffett, who knows a little about investing, says , for most people, simply invest in a total market ETF or mutual fund. For the most part that’s what I do, although I can’t resist investing in a few individual stocks once in a while.:)

[Clifford McGuire]

I tried to get interested in stock picking, but it just isn't my thing. And so I just did the 'Boglehead' 3 fund approach (Total Stock Mkt, Total International, Total Bond) for most of my working life.

I planned to get more financial savy now that I'm semi-retired, but it just doesn't interest me. So, I've been interviewing financial planners to take over.

[Andrew More]

I agree with the common sentiment that index funds is the way to go for right now.

I'm not so sure about the future. Index funds themselves seem to be becoming a crowded trade because everybody knows it the right way to go. Nobody seems to know what happens when all the funds are index funds, and nobody is doing any sort of due diligence into whether or not the companies are appropriately valued. The truth about index funds is that they're price insensitive, meaning that as they become more and more the dominant, there is less and less concern about the underlying fundamentals of the companies themselves. This is bad if you believe that the purpose of the stock market is provide companies with a means of gaining financing.

Even Jack Bogle believe there was a point at which this fundamental shift would cause problems for the market, more than likely heralding increases in volatility, to the point that it threatened the stability and sanity of the market itself.

Also I never hear index traders talk about the issues with funds front running the inclusion of stocks into various indexes. I think the most obvious and blatant recent episode was the inclusion of Tesla into the S&P 500, and it's unclear how much this front running "skimmed off the top" for all the index holders.

Anyway, doing research into companies and picking good ones that are undervalued, and holding onto them is a lot of hard work. It's no wonder that most people would rather opt for index funds, which have so far out performed more active traders. However, there is no free lunch, and there may (or may not) come a time where this is no longer the case.

[Doug Garson]

According to one web site "Studies have shown that more than 97% of day traders lose money over time, and less than 1% of day traders are actually profitable." https://www.ramseysolutions.com/retirement/what-is-day-trading#:~:text=Studies%20have%20shown%20that%20mo re,day%20traders%20are%20actually%20profitable.

[andy bessette]

..."Studies have shown that more than 97% of day traders lose money over time, and less than 1% of day traders are actually profitable."...


Highly skeptical of such unsupported claims and statistics.

There are unlimited ways to make or lose money in the stock market.

[Dale Stansbery]

There are so many extraneous factors that affects a stock's price that any one claiming to be an expert stock picker is deluded. I've been doing my own since I took early retirement many years ago. I only went broke once in 2000! I've since been able to regain my losses and stay ahead of the game. You do have to learn enough about a company to understand it's potential growth. What you can't predict is the overall market direction based on things like Covid 19 lock downs, Brexit, yep drove stock prices down for a while, and Federal Reserve money market manipulation. There are too many high volume day traders and institutional investors that can impact a stock's price at any moment. I cut my risk by keeping a large portion of my savings in money market funds, which are paying quite well at the moment, and some in index ETF's. My mad money goes in to momentum stocks that I research enough to think I understand their future potential and that they will still prosper after a market downturn. and that are currently performing well. If a stock I invest in starts to falter and they aren't a leader in there segment, I'm quick to dump them. Someone mentioned Nvidia. I jumped on that stock years ago and have had amazing returns (if I ever sell that is). Knowing it is a world leader in their technology, I have hung on through market downturns and will continue to do so until something comes along that threatens to displace it in their leadership. Another one I've done well with is Lululemon, yep high priced ladies yoga clothes. it's kind of tailed off recently lately, so it's on the chopping block if it shows too much continuing weakness. What you need is to be able to spend a few hours weekly researching the markets, have a stock market tracking program (I use Worden's TC2000) so you can see a stock's actual performance over time. AND, don't fall in love with a stock, as Kenny Rogers sang, "you got to know when to hold 'em, know when to fold 'em". Good luck, and if you don't have time to spend on some research, the advice to seek out a fiduciary is excellent.

[andy bessette]

...You do have to learn enough about a company to understand it's potential growth...

I know of no one who can do that.

[Dale Stansbery]

The point is if you're wrong, you dump it. Doing it with several picks, if you have a 50% correct pick record, and you dump the bad ones quick and hold on to the good ones until they fold, you can get a head. I've also had ones that I dumped because they faltered, that turned around and I missed out on their growth. The whole point of what I wrote is no one can select stocks certain of their future performance. the best you can do is have an idea of their potential and go from there. Just like any game of chance, a little knowledge can help tilt the outcome in your favor.

[andy bessette]

The point is if you're wrong, you dump it. Doing it with several picks, if you have a 50% correct pick record, and you dump the bad ones quick and hold on to the good ones until they fold, you can get a head...The whole point of what I wrote is no one can select stocks certain of their future performance. the best you can do is have an idea of their potential and go from there. Just like any game of chance, a little knowledge can help tilt the outcome in your favor.

That is simply a gambling strategy.

As I pointed out in an earlier post, there are unlimited ways to make or lose money in the stock market. And there is much advice floating around, some of it good. Such as, when the general market is bullish, it is good to be long (to own stock). When the market is bearish, it is good to be short or sit it out safely. Etc. Though active participation is not for everyone. And, for many, prudent buy and hold strategies pay off. Even if you make some poor buying choices, you're still way ahead of everyone who just spent it all. :)

[Bill Dufour]

Now we can just ask chat GPI to pick for us. What could go wrong?
Bill D

[Lee DeRaud]

Now we can just ask chat GPI to pick for us. What could go wrong?
Well, it could pick stocks that don't even exist...

Article in today's LATimes about a couple of lawyers getting sanctioned and fined because they used ChatGPT to prepare a filing, and it simply made up a couple of nonexistent precedents.

[Keegan Shields]

Ha! I read about this. Apparently the AI industry calls them “hallucinations”. Seems tied to how much “creativity” you allow an AI to use when generating answers.

[Bill Dufour]

Guaranteed 5% return on investment in one day. Buy us post office stamps before July 9, 2023. On July 9 they increase in cost 5%. We plan to buy 50-100 dollars worth, enough for several years.
Bill. D

[Patty Hann]

Guaranteed 5% return on investment in one day. Buy us post office stamps before July 9, 2023. On July 9 they increase in cost 5%. We plan to buy 50-100 dollars worth, enough for several years.
Bill. D
Thank you...good to know.
I still use snail mail for some things.

[Rich Engelhardt]

Guaranteed 5% return on investment in one day. Buy us post office stamps before July 9, 2023. On July 9 they increase in cost 5%. We plan to buy 50-100 dollars worth, enough for several years.
Bill. D
Huh?
How so?
On July 9th, the cost of sending mail will increase 5%.
The value of the stamps will stay the same.

[Greg Parrish]

Forever Stamps.


Huh?
How so?
On July 9th, the cost of sending mail will increase 5%.
The value of the stamps will stay the same.

[Rich Engelhardt]

Alrighty then! Thank you. I had no idea such a thing existed.
Since it started in 2007 and I just found out about it today, that tells you how often I use stamps.

[Greg Parrish]

Funny. If you bought your stamps in 2007, you'd really be making out now. LOL. :)


Alrighty then! Thank you. I had no idea such a thing existed.
Since it started in 2007 and I just found out about it today, that tells you how often I use stamps.

[Bill Dufour]

Huh?
How so?
On July 9th, the cost of sending mail will increase 5%.
The value of the stamps will stay the same.

The lifetime stamps are worth first class postage. So worth 63 cents on july 8 and will cost 65 cents to replace the next day.
Bill D

[Lee DeRaud]

Funny. If you bought your stamps in 2007, you'd really be making out now. LOL. :)
I still have 30 or so from the hundred I bought in 2001, for $0.34 each.
They should outlast me at the current usage rate of 1-2 per year. :)

[Pat Germain]

- Everything I have read says the "Dart Board" method of picking stocks beats any analyst every time.

- Warren Buffet is not an idiot, but he is mostly just very lucky.

- Portfolio Managers get paid to push specific investments. Then they tell their customers to buy those same investments. Win-win for the Portfolio Managers. I never understood how this is a good idea for investors.

- Back in the early 2000s, I saw Disney was trading at $24.00 a share. I thought that was really cheap. I grew up near Disneyland and I've been a big Disney-Head since I was a kid. I bought about $4,000 of Disney. It has since gone as high as $200 a share. I have always used any dividends to purchase more Disney. Lately it's at around $100, but I'm still doing pretty well with that stock purchase. They say, "Buy what you know". I think I just got lucky.

- Years ago I heard an interview on the radio with a guy who wrote a book called, "A Random Walk Down Wall Street". I didn't read the book, but the gist was it's all luck and anyone who claims to have made big money in the market because they are smart is lying.

[Pat Germain]

I saw that claim about Day Traders on the Dave Ramsey web site. It has two references. One appears to be a very credible study from Berkeley University. So it's hardly an "unsupported claim".

https://www.ramseysolutions.com/retirement/what-is-day-trading#:~:text=Studies%20have%20shown%20that%20mo re,day%20traders%20are%20actually%20profitable.&text=One%20percent!,be%20the%20one%20losing%20out.

https://faculty.haas.berkeley.edu/odean/papers/Day%20Traders/Day%20Trading%20and%20Learning%20110217.pdf

[Keegan Shields]

It seems readily apparent that a single person, sitting at home, and using only publicly available information would have trouble outperforming the competition.

Consider this short list of factors stack against you:

- Your cost to trade is higher than large firms (you lack economies of scale that eat into any profits you make).
- Your ability to collect, process, and use relevant data is highly limited (you are competing against teams of experienced math PhDs running models and simulations consuming information scraped from across the web).
- You cost to borrow is far higher than large firms (this also eats into any profit you make).
- Your ability to react to market changes is far slower (firms pay a premium to sit geographically closer to the stock exchanges so they get market information first - we are talking fractions of a second).
- You lack experience and numbers. Even if you did this full time, a team of 20 full time people will usually produce batter results because they can generate and test more ideas than you can.
- The technology based advantage gap has only grown since 2006 as more sophisticated tools/model/simulations emerge. (You don't have access to an $80M server cluster to compute potential outcomes)

According to the Berkeley paper that Pat posted, which looked at day trading from 1992-2006, 75%+ of day traders quit in the first two years. Who thinks that's because they made to much money?

Its important to understand the fundamentals to limit your downside risk. Trade individual stocks for fun if it interests you. Just don't expect to outperform the market over the long run.

Remember the test isn't whether you made money, its whether your returns outperformed an alternative (typically a low cost ETF). Its all about opportunity cost (could I have made more money spending it on something else, like LN tools? :)).

[Mike Soaper]

"Your ability to react to market changes is far slower (firms pay a premium to sit geographically closer to the stock exchanges so they get market information first - we are talking fractions of a second)."

I recall hearing a while back about a $100-300? million underseas cable being installed just to reduce network transit time by 5-6ms to give some traders that 5-6ms advantage

[andy bessette]

...the "Dart Board" method of picking stocks beats any analyst every time...

Pure nonsense. Don't believe it.


It seems readily apparent that a single person, sitting at home, and using only publicly available information would have trouble outperforming the competition...

You don't have to "beat the competition." You only have to do better than you otherwise would have done.

Decades ago I was very badly injured while self employed as a boat builder. I could not work. And I had no insurance. So I bought a computer, a Quotrek, and a book entitled: "Technical Analysis of Stock Trends". With only ~$15,000 in savings, I taught myself to day-trade based on technical analysis.

That year, using all the leverage I could, I made nearly $1,000,000 worth of trades. The accounting was a nightmare for my tax man. And the broker made a bundle in commissions. All I made was about $1,000/month, barely enough to live on. Once I was able to begin working again, that distraction soon inhibited my ability to trade, as I was no longer so focused on the market. So I quit trading.

Looking back at the adventure I can honestly say that it might have been possible to make the same amount of money by staying long on many of the excellent stocks I had traded, as my commission costs would have been nil. Still, it was a wonderful lesson, exciting as hell, and I grew as a person, supporting myself and never collecting disability or unemployment, never becoming a burden on anyone.

[Pat Germain]

Pure nonsense. Don't believe it.

I believe it because it's true: "What is all this monkey business? It started in 1973 when Princeton University (http://www.forbes.com/colleges/princeton-university/) professor Burton Malkiel claimed in his bestselling book, A Random Walk Down Wall Street (http://www.amazon.com/Random-Walk-Down-Street-ebook/dp/B004KKXMZQ/ref=sr_1_fed0_1?ie=UTF8&qid=1355517682&sr=8-1&keywords=a+random+walk+down+wall+st), that “A blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

“Malkiel was wrong,” stated Rob Arnott, CEO of Research Affiliates, while speaking at the IMN Global Indexing and ETFs (http://www.imn.org/Conference/Global-Indexing-ETFs/Home.html) conference earlier this month. “The monkeys have done a much better job than both the experts and the stock market.”

https://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the-market/?sh=5f2052cb630a

[andy bessette]

...Burton Malkiel claimed...

OK, yeah, right.

[Pat Germain]

OK, yeah, right.

Read the article. It's not my opinion. You can find many, many examples of this online. Dart board method beats any analyst. It's a fact whether you choose to believe it or not.

[andy bessette]

...You can find many, many examples of this online...

I can find many, many examples of other kinds of drivel online also. Admittedly I didn't pay much attention to who made the preposterous claim. Nor did I turn off my ad blocker to read the claim in full. It isn't necessary. If it sounds like BS and smells like BS, it's likely BS. If there was an iota of truth to this fantastic claim, fund manager jobs everywhere would be taken by monkeys with dart boards.

[Jerry Bruette]

The problem I see with people trying to pick stocks is they want one stock to gain 1000% and then retire, or it has to beat the market every quarter. I don't think you need to beat the market or have a 10 bagger. Pick some good well known stocks that preferably pay a nice dividend, reinvest that dividend in a DRIP, and hang on to them.

People that were fortunate enough to get Apple, Yahoo, Netflix, etc. for penny stock prices were more speculating than investing. Invest in things you are familiar with and make sense. We all need clean water to live and we need to get rid of our trash. Find a water utility and a good waste disposal company to invest in.

If you're investing, it takes time to build wealth, if you're speculating you expect to gain wealth overnight. The game isn't always won with home runs but with good a group of good solid consistent performers.

As far as the cost of trading, I can't think of an online broker that charges anything to buy or sell anymore. With some understanding and common sense you can do okay with your investments. Just don't expect it to happen overnight, remember pigs get slaughtered.

[Pat Germain]

It's the fund management which is the BS. But they've managed to convince people they can somehow predict the market which is preposterous. It's like if I charged people to tell them what slot machines to play to win more money. Sure, I can say I know casinos tend to loosen up quarter slots next to high traffic walkways, but I still can't predict when they will hit a jackpot. That's the reality. But I can't tell people what to believe.

Another similiarity between gambling and buying stocks: the people who do it often have no idea how it all works.

[Jim Becker]

Fund/Account Management "could" be advantageous if they actually proactively manage things, but I have to wonder just how much attention gets paid to the actual "little guy" compared to large investors. I used the word "Account" for a reason to differentiate from the folks who actively manage the actual mutual funds and other things that people can choose to invest in rather than discrete stocks. I've done pretty good with the latter and will continue to stick with the funds I use. I did migrate most money to a lower stock content fund commensurate with retirement so my gains are a bit less when things are up while my losses are less when things fluctuate down.

[Bill Dufour]

To equal a managed account all you have to do is do no worse then about 0.7 percent less then they make. If you make 0.5 % less per year then the managed account which charges 0.7% you are doing better.
BilL D

[Andrew More]

It's like if I charged people to tell them what slot machines to play to win more money. Sure, I can say I know casinos tend to loosen up quarter slots next to high traffic walkways, but I still can't predict when they will hit a jackpot.

That's the thing, you just need to tilt the odds enough in your favor that you don't need to be able to perfectly predict the outcomes, just the general result. It's one of the reasons why Buffett urges people to go long, and not short. The trend of the market has been upward since inception, and no matter how long it's down for it will return to this general trend. This is because over time our society has steady gotten richer, and the stock market reflects this.

If you want to compare it to gambling, it's the same as the guys counting cards in Blackjack, or playing poker. They don't need to know what's going to happen next, they just need to know enough to make the best play consistently and the odds will fix everything else.

So yes, if you knew the quarter slots in certain areas paid out more often than not, and by how much, you could tell people to do that, and it would be a successful strategy, even if you couldn't predict the outcome of the next pull, or the next dozen pulls. Further if you did, you'd probably see that changed by the casino, which is something else that happens in the stock market: once an approach is generally known, it gets arbitraged away by traders taking advantage of it.

All that being said there have been a few funds and individuals who have consistently been able to out perform, and do so year after year after year. Same with day trading, it's just less that 1%, so the odds are very bad that you're going to be the next hot stock picker.

[Patty Hann]

The problem I see with people trying to pick stocks is they want one stock to gain 1000% and then retire, or it has to beat the market every quarter. I don't think you need to beat the market or have a 10 bagger. Pick some good well known stocks that preferably pay a nice dividend, reinvest that dividend in a DRIP, and hang on to them.

People that were fortunate enough to get Apple, Yahoo, Netflix, etc. for penny stock prices were more speculating than investing. Invest in things you are familiar with and make sense. We all need clean water to live and we need to get rid of our trash. Find a water utility and a good waste disposal company to invest in.

If you're investing, it takes time to build wealth, if you're speculating you expect to gain wealth overnight. The game isn't always won with home runs but with good a group of good solid consistent performers.

As far as the cost of trading, I can't think of an online broker that charges anything to buy or sell anymore. With some understanding and common sense you can do okay with your investments. Just don't expect it to happen overnight, remember pigs get slaughtered.

^^^ This, squared and cubed ^^^