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
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
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."