This week, I’m sharing an article from ETF.com titled Perils of Owning Individual Stocks. Author, Larry Swedroe, discusses why buying individual stocks is a very risky proposition. As you read the article, you will discover some very interesting facts about owning individual stocks that squarely places the odds OUT of your favor.
My favorite stat is the one that says only 25% of the stocks make up all of the market’s gains. This is a striking statistic and highlights just how difficult it is to actively pick stocks. The research was based on 3,000 total stocks and as you can imagine, determining which 25% stocks to own would be very difficult, if not impossible.
Don’t attempt to play the game of filtering stocks in an attempt to find the best values or the diamonds in the rough. Instead own a globally diversified portfolio (of thousands of stocks) centered around efficient market pricing and investments that have historically shown an ability to generate higher returns.
What are your thoughts on active versus passive investing? Do you believe that owning individual stocks is a viable strategy? Have you had success with owning individual stocks? Please feel free to share any comments, questions, or experiences you have below.
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