August 20, 2013
Selecting winning individual stocks is a game of chance you should not play. Why? Alternative?
Selecting winning individual stocks is a game of chance you should not play. Why? Alternative?
Because doing so is like timing the market; not probable. Instead, you should buy no-load index mutual funds.
You are correct, Katherine. Allow me to add to your comments. Selecting individual stocks that will outperform other individual stocks is a loser’s game. What does that mean? The system is rigged to benefit the financial industry who is closer to the truth when it comes to understanding the quality and health of each individual company in America. Translated: Whatever you think you know, people and computers on Wall Street have known it long before you. That means the price of any individual stock has already been affected based on that information. Picking a winner is pure luck and should be avoided by people like you and me.
Katherine was right to recommend those boring and very inexpensive no-load index mutual funds. You will eliminate commissions, timing the market, manager risk, and risk of any one company going broke (a broad index fund usually owns thousands of individual companies). The Total Stock Market Index Fund at Vanguard.com is a wonderful example that should work for many people with time horizons beyond 5 years. Stay away from individual stocks!