NISA 5 year plan questions.

[CarlB]

The problem with picking individual stocks is the vast majority of stocks are poor investments. They perform worse than one month treasury bills. The majority of stock market growth historically is driven by a very small number of 'winner' stocks. This is a seminal paper on the topic: https://www.sciencedirect.com/science/a ... 5X18301521
Summarized here and as mistake 1 in this video.

So picking individual stocks can be great if you back the right horse, but the odds of individual investors beating the market this way are extremely low.

I guess those investors are better off with a tracker which is loaded up with garbage like Facebook, Coinbase and RobinHood.

[Haystack]

The problem with picking individual stocks is the vast majority of stocks are poor investments. They perform worse than one month treasury bills. The majority of stock market growth historically is driven by a very small number of 'winner' stocks. This is a seminal paper on the topic: https://www.sciencedirect.com/science/a ... 5X18301521
Summarized here and as mistake 1 in this video.

So picking individual stocks can be great if you back the right horse, but the odds of individual investors beating the market this way are extremely low.

I guess those investors are better off with a tracker which is loaded up with garbage like Facebook, Coinbase and RobinHood.

Yep. Low-cost broad market index funds outperform stock picking handily. That is no secret, the data has been in for decades.

You buy the haystack, garbage and all. That is how it works.

[goran]

I guess those investors are better off with a tracker which is loaded up with garbage like Facebook, Coinbase and RobinHood.

erm.. most people here (probably almost all the members here) are "those investors" who are into the low cost diversified index funds.

[RetireJapan]

This is my experience of the investor's journey:

1. Read about index funds
2. Think 'that sounds too easy: there must be a better way'
3. Try a bunch of things: value stocks, gold miners, hedge funds, Chinese internet stocks, leveraged ETFs, dividend growth investing, net-net stocks...
4. Realise I'd have made more money just buying index funds
5. Sell everything and buy index funds

Took 15 years!

[beanhead]

Nobody buys just one stock. If you are buying stocks you would likely have at least 10 or 20 at the very minimum.

Also, if a company's stock, who I believed in declined by 50%, I would likely buy more of that stock. There are lots of examples of stocks which decline after a 'scandal' then regain the losses less than a year later.

Of course I didn't mean just one stock. Even 20 is not very diversified. I have about 30 individual stocks, US and Japan, and this is far from diversified.
For every example of companies which bounce back, there are counter-examples of those which do not, and go bankrupt.

If you have some 'edge' in stock-picking, good luck to you.
For most of the people, most of the time, buying index funds will be a more sensible plan.