September 19, 2014
Buying individual stocks in the attempt to “hit it big” is a loser’s game (yes, this includes the Alibaba IPO). Why? Alternative?
Buying individual stocks in the attempt to “hit it big” is a loser’s game (yes, this includes the Alibaba IPO). Why? Alternative?
The reason you dont buy individual stocks is because they have more risk for less return then an index fund. The individual stocks have extra risks involved with the operations of that one company, you dont want all you eggs in one basket, that is why index funds are a better offer, you want to own as many different company as you can to be better protected from some risks.You never know what the companies are going to do before you buy them and the price is already figured in to the stock, its best to just buy no load index funds from vanguard and get the market return and not try to beat it with no luck.
That was another very good answer, Garrett. Let’s recap.
Whether you are buying or selling an individual stock, you are making the case you know the securities value better than the party you are trading with. Over 90% of the time you are trading with professionals on Wall Street who have algorithm’s built to capture every small advantage they can based on what is known to them, which by the way is MUCH more than you know.
Thinking you are going to outsmart them is delusional and nothing more. If you come out ahead, it was good luck. If you come out behind, it was bad luck. The probability of you losing is much great than of you winning. Turn the odds around by owning those cheap and diversified no-load index funds. Using that method provides you the chance to use all of the information that is known to benefit your investment return over the long term. In the long run, your pocket book will grow by dollar cost averaging money into those index funds. Awake!