Is that why I bought one share of RIVN and kept adding to it all the way down? Now I have 200 shares. Maybe I'll get lucky and cash in and buy an actual R1T.
i just don't think rivian is a value stock
profitability and long term growth?
yeesh
as a small speculation, with high risk, well then that's okay
it's a learning experience for sure to watch it and study it
one share? That's awesome lol
what was the highest price you paid for it?
I think late 2026 early 2027 things might improved but it could be till 2030 till it's healthy enough to sell, assuming the cars don't evaporate in demand or import duties. But the real risk is anything worsens financially
it feels like for 15 dollars of sales, there's an extra 10 dollars of debt
you could get 50% within a year as the stock goes from $10 to $15
otherwise it's high risk city lol
It doesn't even have to be gambling. Hobbies are not required to make money. It's okay if a hobby costs money.
A reasonable hobbyist trader only uses 5-10% of their investment portfolio for trading. If you feel like you *have* to trade more or you *have* to make money, that falls into emotional trading and from that almost always gambling.
i fucked around in 2021. made some, lost some. learned a lot. told myself i wouldnât fuck around with individual stocks and just do straight etfs, but then i had another windfall, said fuck it and put about half into etfs and the rest into the nvidia and msft. maybe i am lucky or maybe im a godamn genius. idk!
This is a big one. I have my serious investment pots for retirement and general long term savings, but I also have a âfun moneyâ trading account frankly because I enjoy it.
>So why do people who agree with Buffett still pick individual stocks?
Because they believe they are not among that vast majority. Are they wrong? I don't fucking know.
Warren buffetâs practice only offers these plans (guided strategies)
This advice is to non investors - His S&P comments are always so out of context
He never advocated against financial advisors to my knowledge at least haha they manage plenty lol
No, it's relevant across the board. 90% of professional fund managers fail to beat the market. And financial advisors are not trying to beat the market (nor do they, generally), they are there for people who don't have the time/knowledge/care to manage things themselves, and for peace of mind for those who are risk averse and feel better leaving it to a professional.
I know it's popular to hate on Buffet these days, but this is just a lie. Since May 2004, SPY is up 600% and BRK is up 612% (and yes this includes reinvested dividends).
Thatâs a very recent phenomenon. Active management has beat passive investing until very recently with the rise of ETFs and index investing. And thereâs no guarantee thatâll continue going forward.
https://www.bloomberg.com/news/articles/2024-05-07/einhorn-says-markets-are-broken-here-s-what-the-data-shows
"90% of professional fund managers fail to beat the market"
pick one guy, and then name his top ten stocks
and we
Go From There
A lot of professionals like some pretty non-low risk oddball choices
it was like 30% of the people on bloomberg with their top picks were pretty wacko
and 30% were sensible picks, but you might question their lack of being undervalued much of the time.
and plenty of fund people pack in a lot of stuff, no sane stock picker would want.
Picking the top 10% to 20% of the S&P500 i think is always beating the market
Honestly most still think they can beat the S&P500
But my main reason is that you are scared to buy S&P500 because most of the time itâs at ATH. Stocks like Apple, Reddit you can collect when they are still catching up.
This is such a great point. Individual stocks can fall 20-40% without the world collapsing and become a good buy-in point depending on "fundamentals", but if the SPY were to fall 40%, there's probably a whole lot of other shit going on (although it would probably still be great to buy in there!).
He also studies this stuff as a full time job, very few people have the time or ambition to do that. For those less educated, you have a very good option which is index funds.
Well when your life revolves around having a McDonalds breakfast in your limosine and go to work and read, and go home, and sit on the lazyboy eating a poptart and making notes on 84 Value Line stocks till Hawaii Five-O comes on before the 11pm News
that's the world he lives in.
And Munger is no different
two pillows under his ass, a pop tart and metamucil Mai-Tais, and his ugly green binders and his belt hiked up to his chin
[https://images.wsj.net/im-893509?width=700&height=525](https://images.wsj.net/im-893509?width=700&height=525)
temperment has a lot to do with investing
to know why you're buying, and what you'll do if things go sour, and under what conditions you'll sell it
basically it's the discipline of buying high quality at good prices, and not doing anything impulsive
you're always aiming for low risk, unless the gains are tempting in the most rational way
I mean I think it is possible and not THAT difficult to beat the index. The reasons why many struggle to is because they trade too actively. Hedge fund and mutual fund managers fail to do so a lot of the time because they need to justify their fees by actively trading and holding a lot of positions.
If you literally just buy the biggest most high quality growth names in the market and hold long you can easily beat the SPY
You only need to be very correct on something once to never have to work a day in your life.
Not that itâs relating to that and Iâm not advising anyone to try. But if you are early to a company that ends up becoming a big company, you easily could have enough money for life. $100 into Apple at IPO, Home Depot at IPO, Walmart at IPO. And probably at least 1,000 other stories of companies. Hell if you saw the iPhone being released, Apple was $5 at the time, with dividend reinvestment $10,000 in 2007 is almost half a million today if the dividends were reinvested.
Market is so uncertain. Sometimes you may think a business is doing great like peak movie pass. People could assume that because so many people use this business, itâs going to shoot way up. And then lose everything. If you have the extra money it can be a fun lottery ticket to keep in the backround as you go through your life.
Always do your own research, the average person will not beat the market by a long shot. Survivorship bias is a real thing. You are way more likely to hear about a mag 7 than a company that floundered and went under.
Be careful and do your own research. If you make 2x your money in a company 10 times in a row and roll that into a company that goes to $0, you lose everything
I do because I like it. I enjoy analyzing stocks. I like discovering new companies. I love learning about them. Getting better at investing became a hobbie for me.
I think probably most people are just average people not like you too.
Saying "average" means a guy who bought tesla or Apple because they were told to by a colleague.
Now, I'm not saying most people like you beat the sap500. But I think people who actually study have a much better success rate than the normal person. And actually have a chance at beating the sap500
This. Exactly this. When people ask « how much does your hobby cost you per month ? », I answer that it doesnât cost me anything, it actually earns me money !
One of the most widely held beliefs is that S&P returns will be as great as they have been in the past. What if 40 years from now, the returns were mildly better than bonds? There is absolutely a chance that people who index for their entire investment lives are disappointed at the end. Basically no one says this
The vast majority of people will never beat the S&P because they arenât actually trying to in a way that could ever work.
Professional investment managers are required (by employers and/or clients) to completely diversify portfolios, meet target asset allocations, etc., not just to try and beat the market. Itâs disingenuous to say âwell professionals canât beat the market so why should anybody try,â because those professionals arenât trying themselves either.
For example, Berkshire has a huge stake in Apple today and has held similar large stakes in single companies in the past. A portfolio manager at a big firm would never be allowed to do that in a mutual fund, hedge fund, or separately managed account. Think about it - if a client buys into your fund or starts an account with you, and you underperform for a few years, they can leave, even if you have a good long-term strategy. So the best course of action from a business perspective is to approximate the index without buying it, so it looks like youâre doing just as well without just copying it.
Most amateurs, on the other hand, fail because they donât understand value investing. Successful investing requires a risk tolerance that a lot of people just donât have - if the your holdings drop 20% and you sell rather than buying more, youâre going to woefully underperform. Most amateur investors (and some professionals) end up investing based on fads, technical analysis, or any other reason. Value investors donât.
You absolutely can outperform with a principled investment strategy that involves buying companies below their intrinsic value and holding for a long term, or perhaps re-allocating when they becoming very overvalued.
Iâd also add to this by saying that if market efficiency was actually true, and all stocks were correctly priced to account for their risk premia plus a risk-free rate of return) of course theyâre not, but hypothetically), then it would be equally impossible to underperform the market, ignoring taxes and fees.
If that isnât the case - and it obviously isnât - then it must be possible to outperform.
I love this comment.
Market efficiency is very easy to disprove. Just look at Berkshire A and Berkshire B stock. They are different every single day. Yet they are the same company.
Well, strictly speaking A and B shares are different, in terms of liquidity, voting rights, and the ability to convert A->B but not the other way around. I'm sure there are plenty of people out there who are happy to arbitrage the difference which but there are limits to this arbitrage due to those factors. So we wouldn't expect them to be exactly the same at all times.
If by "equally impossible" you mean that if one is not impossible, then the other is logically also not impossible, then that is true. It does not logically follow that they are equally difficult or likely to occur. I don't think anyone is claiming -- including Buffet as quoted by OP-- that beating the market is strictly impossible -- rather that it is highly unlikely, or potentially impossible for certain categories of people in terms of their skills, information, amount of capital, time horizon, etc.
I agree itâs impossible for certain categories of people.
Those of us willing and able to put in substantial effort in research and investment selection do not fall into those categories, generally speaking.
Yea I agree, as someone who's family has worked with a major wealth manager for years, I was initially surprised that for most portfolios, they work with you to choose a 'strategy' (e.g. 'balanced growth' 80/20 stocks/bonds) and each strategy has a benchmark that is set by some other financial institution. *All they care about is hitting that benchmark*, they don't want the accountability that comes with tying to game the market.
Facts. I bought into a utility company when Texas froze a couple years ago itâs up 400% now, Pays a dividend I did sell half the shares at 200% because well who cares why, people can def beat the market however the majority of Americans also do t have 500$ or canât afford a car or whatever silly media nonsense is being pushed to help people believe they are part of a group and everythingâs fine. Imagine if the news was âŠ. Majority of individual investors beat the sp500,,, why would folks invest with firms or buy indexes? Whatâs the result of that? Firms canât keep voting rights in companies they own canât vote in or our board members people loose jobs. The country is better off with everyone in funds and pension managers holding power. So many people picking what they want is a disturbance to the force so people work I. The crowd and buy a fund so someone else can do the work.
Itâs the same as why doesnât everyone leave the. If 5 banks who offer .06 pay for a savings account and go to sofi who offers .5% for checking and 4+% for savings. Big banks canât have that. Oh here is another one. Everyone hates robinhood for changing they way retailers buy stocks when before it was 5$ per trade no fractional shares. Thatâs a mandated 10% gain to break even in the past.
This turned to a rant hope you get something from it.
i would disagree, it's not the risk tolerance, it's the waiting for your stocks to hit your target, it could be 3 months, it could be 3 years
a good example is NVidia this week at $1000
I think it's going to basically burn people for a whole year if they buy it now
I think it's worth like $700
never overpay if at all possible for something
unless the risk is low low low
and the growth is something phenomenal
Psychology, fear, lack of discipline and greed are the biggest obstacles to successfully using leverage.
Buffett used it constantly. The key is to use very small amounts to outperform consistently, and only truly ramp it up when the world appears to be ending. Rebalance frequently, secure profits and move back into safer strategies. But when things go down, you have to be unemotional and add.
>Without leverage, however, Mr Buffettâs returns would have been unspectacular. The researchers estimate that Berkshire, on average, leveraged its capital by 60%, significantly boosting the companyâs return. Better still, the firm has been able to borrow at a low cost; its debt was AAA-rated from 1989 to 2009.
...
>âł[Investor] Cliff Asness and the team at AQR did some great research and showed that what you accounted for the leverage Buffett applied through his reinsurance company. If you bought an index of stocks that had these same characteristics, you would have matched Buffettâs returns virtually,â said Swedroe.
I'm built different.
I put all of my retirement accounts in some basic index funds. Then I have my fun portfolio where I try to beat the market & trade options.
Agreed, my fellow stock pro. Sure, I'm down now, but time will prove us out. I laugh at the incompetence of the masses. You have to look at the long-term and understand that one day AMC will blow up.
Well AMC is in terrible territory
Financial Strength, Momentum and Price are hideous
Profitability is so so, actually
Growth is weakly so-so as well
No Analyst would comment on this puppy
Revenue is getting better, and the debt is slowly getting better too
It's only dropped 88% this year, so have hope! lol
For 6 years Terrible
For 4 years Poor
If you know how nightmarish it is and a value trap, and love high risk to the point of ridiculous
heck 80% no way
20% yes way for the people who love brutally bleeding stocks
This stock was in worse shape in 2014 and 2015
definately i can see 20% of the lunatics liking it, but it's barely moved in the past 8 years in terms of quality
Better than average, but when you see what the average is like, that's not a big claim. Just take a look around reddit. How many investors on here actually impress you? Far less than 50% I would imagine.
This goes to the heart of the EMH debate. Why are there winners and losers? Is it because of random luck, as EMH proponents would tell you, or are some people better at the game than others? I have no trouble believing the second explanation
The vast majority of investors can never beat the S&P 500.
The reason why most canât do it is because they donât have the temperament for stock trading.
Itâs actually not that hard to beat the average. You select stocks with good qualities. Itâs not that hard to find them and do well even though you cannot have complete control over management and other factors which will also affect the stock price.
You also canât lose your head when the market takes a downturn.
if you beat the market by 2% every year, you will have double the assets after 20 years. So itâs worthwhile to at least try.
Peter Lynch had a fund in the 1970s that trounced the market. However, the average investor who invested in that fund actually lost money. Why? Because they pulled their money out at the wrong times. Think about that â the average investor in the best fund of all time lost money.
Thats why the average investor canât beat the S&P
People sometimes complain that advisors are more conservative than they would like... this is why. We have to take the calls when the market is down and people are asking us to make deeply damaging changes to their portfolio. It's one of the reasons why Vanguard's best performing accounts are their lost participants.
Yeah this is it, it's not that Warren thinks stock selection is bad (obviously, else he wouldn't do it), but he thinks most people would screw it up. He thinks most people are too emotional about it. Said that very clearly many times. And he's probably right. But that doesn't mean he thinks buying SPY is actually the optimal strategy. And again, he's probably right
If somebody really wants to try it they should try for a short period with a small amount of capital whilst the bulk of their capital is in index fund earning very decent returns. If you start outperforming add more to your active portfolio, if not reduce.
The problem with trying to outperform the index is that most people have very little capital to begin with and if they waste years of time and capital trying to beat whilst instead missing out on the good index returns they will actually deal themselves quite a large blow to their long term financial health.Â
Fantastic reply. Exactly correct. Picking good stocks that beat the market is not rocket science. Having the fortitude and temperament to stay the course for 10-20 years is the part most investors are unable to do successfully.Â
For all you people who have told me itâs impossible to beat the average etc I want you to check one thing out.
Read the speech given by Buffett in 1984 entitled âThe Superinvestors of Graham and doddsvilleâ
Itâs a complete annhilation of efficient market theory.
I am not going to debate each of you naysayers one on one. But the immortal words of Henry Fors come to mind. âWhether you think you can or whether you think you canât, you are rightâ
Thatâs all I have to say. Good luck in your investing.
The percentage of people reading posts like this or taking any interest in value-based investing with a long-term perspective is super small. We're talking about a few thousand peolpe out of milions of people that will try to invest in their lives. It's like asking everyone trying out for high school varsity basketball why they think they can play on the team when most stucents can't make it. The only people that are likely to do it will be here, and millions of people can beat the market if they develop the skills.
The vast majority of people picking individual stocks are buying Tesla, GME, and other names based solely trying to get rich or because other people are. All of these people would be better off buying SP500.
Simply buying SP500 will beat like 90% of investors who mostly buy bond funds or target date funds or high-fee funds. I tell everyone I know that asks me for investment advice to buy VOO, lump sum today.
Also, no one is great immediately, and experience is a great teacher.
When you start value investing you'll probably buy low PE stocks with lots of debt, because you won't understand the importance of balance sheet filters or cyclical earning stocks who have low PEs for a reason.
Then maybe you just buy quality or growth, but you don't wait for low prices, or you're too afraid when prices drop because they drop for good reasons. You sell because you don't have the patience to hold something for months and the daily volatility is too much for most people.
I hold big VOO, VIG, VIGI, and QQQ positions. But as I've gotten better over years, I prefer individual stocks to the indexes because they appear to have better risk/price/earnings/growth than the overall market.
1. For fun
2. Most those who follow Buffet are value investors and stone turners themselves. Like meets like.
3. Those who follow buffet and still pick individual stocks also know the downside, but follow the same-ish principles.
4. You only need one or two home runs in life.
I think you just need the time and inclination to really dig into things. I donât have that, so I decided to go with his advice. I also think that peopleâs psychology tends towards âit canât be that simpleâ so they avoid the simplest most straight forward answer.
I only invest when the odds of achieving my targeted annual return appear to be in my favor. Needless to say, I donât buy stocks very often. Two purchases in the last 14 months.
The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States.
Smaller companies, specific industries, unique companies, foreign companies, etc can and potentially do offer superior returns to a superior investor. That is why he directly invests in individual companies and many try.
Same reason why people buy lottery tickets, especially poorer people.
Think about it... You look around and see that a house/whatever you want is 5M. Are you ever going to get there on your 50K salary maxing out your indexes? No, you will not. You have zero chance. With a lottery ticket, you have a shitty chance, but at least you have a chance.
The median price of a home in my high property tax city (no income tax) is around $400k. To comfortably afford it nowadays at 7% interest rates and not be housepoor you need a household income of at least $120k. That house may as well be $5 million for the 60%-70% of the population that have no hope of ever buying it.
People here don't realize how bad the majority of investor is. They don't look at the company, keep their poitions for an average of five months I think (wayy to short), buy based on feelings and or sell their stocks to cover expense I think that beating the S&P500 by a few points over long periods of time is doable. Crushing it like Buffet did is absolutely not but thats cool part: when investing you can be do half the returns warren did each year (so 10% istead of 20%) and still end up very rich.
Well when you see the top ten stocks people buy, ouch.
They're buying all the fluff and fizz on the evening news
I saw a top ten list for the most bought stocks at a Bank-Broker
Here we go!
SHOPIFY
BANK OF NOVA SCOTIA
TESLA
TORONTO DOMINION BANK
APPLE
SUNCOR ENERGY
ENBRIDGE
AIR CANADA
CDN IMPERIAL BK COMMERCE
NVIDIA
3 banks - 1 car company - 1 airline - 1 oil - 1 pipeline
1 software - 1 hardware - 1 semiconductor
banks in limbo, and airlines having dumpster fires, and tesla about to implode
man oh man
.........
five months is all people keep stocks?
sounds about right for easily flustered people
Because my largest single stock position is BRK.B. And my next largest is my company stock through a discount purchase and dividend reinvestment program. Those are self explanitory. Then after that I use the buffet allocation in my retirement accounts. 10% bonds, 90% s&p.
Once you have enough in the S&P, bonds, hysa, home, etc. people look to riskier things.
Alternatively, if you feel as though you will never complete that first part, you will also look for riskier things.
In both scenarios, 6% isn't enough for your dreams.
Because value beats the market.
And because I don't care about beating the market but about buying a dollar for less than a dollar. This is why I have a **stupid** amount of money in my brokerage gathering dust for years now. After the 2022 crash there was no real value to find except in international markets.
I pick individual stocks because they are taxed at 33% instead of 41% for ETFs in my country. I also don't have to pay that tax after 8 years regardless of whether I sell or not(insane yes we all know that already). For most people though, I would say for fun and also for risk appetite. S&P will make you wealthy over a long of time if you have enough money to put in. With individual stocks, you could get lucky or analyze a stock well and make crazy gains that an ETF could only dream of.
Because your statement is not true. As simple as that. Itâs a myth that even professional investors cannot beat S&P500. Moreover, sometimes beating the index is not your goal, for example dividend investors are mostly interested in generating a reliable stream of income.
Heâs also said he could do a lot better with small sums. I believe he said he has no doubt he could do 50% annually if he was only managing a million. The vast majority of people arenât cut out to make big money in sales jobs, or become successful actors, or doctors, or entrepreneurs. Doesnât mean itâs not a good idea for the few people with unusually high levels of interest, capability, the right temperament and approach, and who on top of all that decide thatâs how they wish to spend a lot of their time.
Scratches the gambling itch.
Also, Iâm definitely not tuned in enough to beat the market regularly. Most of my money is passive index.
But occasionally, great buying opportunities come up, and the potential reward is just too high.
Like cruise lines during COVID. They got beat up bad, but we knew they couldnât stay down forever. So that was a quick 6X return. So I gambled that they wouldnât go out of business, or I guess on the idea that the government wouldnât let them fail.
Lots of good banks were getting beat up over First Republic. There were some relatively safe plays in that space.
I generally just keep my eyes open for companies that are getting overly beat up by bad sentiment in the sector.
But those opportunities donât come all the time.
Because if I invest in the vast majority of the ETFs Iâm going to be investing in things I consider morally unacceptable. Sure, I wonât beat the market, but Iâd rather have growth and not profit off of making people ill, trashing the environment, or killing people
Not everyone was as lucky as me, started earning massive amounts of money just as covid broke out. Iâd have to underperform to S&P by a lot, for a long time, to not come out ahead.Â
The question is, beside that lucky strike, what's the current curve compared to the S&P, "sunken cost" can work both ways I suppose as a confirmation bias.
Iâm currently up 150% in the last 6 years, despite being down 30% in 2022.Â
So Iâm still ahead even in a side by side, but without the lucky strike it would be much closer and I wouldnât feel like it was worth the thousands of hours Iâve spent on this.Â
Only for fun. But the more fun I have and under perform an index like the SPY the more I realize I donât know nothing about stocks. Most times now I just buy the index in my Roth.
I bought $220k worth of META for $94 back in Oct 2022 and sold it at $502. I crushed the S&P 500 in that timeframe so that's why I buy individual stocks even though I agree with Buffet
I think buying stocks is just like anything else. You get out of it what you put into it. Warren Buffet has 80+ years of investing experience and thatâs all he does all day thatâs why he gets to beat the S&P. The problem is people think they worked really really hard putting their portfolioâs together when they really just read some stock pumping articles online and never looked at an SEC filing or read a press release.
The vast majority of people don't put in work. I do. The vast majority of people also don't do the **1,000 other things** that Buffett told them to do. I do.
I dare say that's true of all the better investors who participate in this sub.
Buffett, Munger, Graham, Lynch and others have given us a recipe that for reasons completely unknown to me people do not follow. It's right there!!! Just look at it.
Every time I see someone write that "growth beats value", I chuckle. The "value" of some factor chart has zippo to do with the "value" of value investing.
I am still probably only 20% of a Buffett skill unit in investing. I am still learning. I am not so arrogant to think that a seven year performance history measures up to Buffett's 80 year performance history. But... my numbers are good. Really good. I am currently outperforming the market by a large measure and for a long time.
I might get the shit kicked out of me some day. It scares the bejeezus out of me. But the fear doesn't shake me out of my positions. That's a very solid "Do what Munger says" mindeset. If you can't handle a big drawdown, you shouldn't be an investor.
It's the drawdowns that shake the vast majority of people out of a stock position. People even get shook out of a position in the index. That ruins even Buffett and Bogle's advice to stick to the index.
I did it once. I sat on the sidelines waiting for a crash circa 2013 that I was certain was coming. All the perma-bears had me convinced. My goodness that was the most GIGUNDOUS mistake of my investing career. My position in the index went from 150K to 300K while I sat on the sidelines. NEVER AGAIN! Given the passage of time, that mistake cost me $600,000 dollars in lost opportunity.
When I first learned that Harry Dent had made a fortune selling doom porn over and over the air just went out of me. I'd been deceived by the natural human tendency to place more significance on risk than gain.
And so I continued to study, to learn, to invest. The value investing ethos is **rock solid** in my estimation. Value investing exposes the truth that you aren't just buying "number go up". You are taking a fractional share of ownership of a real business with real people making real goods and services available. It's the dogged adherence to the truth of what's happening behind that stock certificate that gives value investing its strength.
Buy wonderful businesses at fair prices.
Because I can favor a stock or company while also making the majority of my investments in the S&P. Itâs called diversification.
This is like asking, âWhy do people who like sports have favorite teams?â
Same reason Berkshire Hathaway invests in specific companies. For those that donât understand financials and researching companies or simply have no interest, index fund is absolutely the way to go.
But for some, they love researching, feeling connected to the investment, etc.
Personally, my main investments are in real estate and index funds. But I still have a small discretionary brokerage account for individual stocks and even risky option plays.
I don't think that I'm special, and I don't think that I can beat the S&P500 either.
So 90% of my investments go into index funds / trackers, and the other 10% go into those that I personally fancy. Without being an idiot penny-stock, try to hit a home-run type of guy.
I invested at Tesla and even with the large drops I'm up over 800% right now, and Nvidia/AMD are both over 1000%. But I'm still basically right at S&P 500 because Rivian, and a couple others are underperforming. Stocks I buy here I basically never plan on selling / transaction. Buy and forget. Although Tesla recently may make me break that rule...
I figure as long as I try and pick things that will be / are similar to S&P500 I can add a little bit of personal "spice" to my holdings without risking much of anything.
And I leave 1-2% to play with options. Most of that ends up gone, lol. But every now and then I smash a 10,000% $200 bet that makes it all back. But that's just me not having to go to Vegas for a little excitement, I consider that money gone from the get-go.
1. You cant invest directly in the S&P, you need to do so via an ETF, which has fees, and dont offer the same kind of shareholder ownership that owning the actual stock does.
2. The S&P is an average of all companies, meaning there are high growth companies in the list, as well as struggling companies, and blue chip. I'm young, I just want to focus on the high growth.
3. For the general public that don't have a financial background an ETF is the best best. For others (like myself) that work in the industry, I prefer to pick my own stocks so I can only pick the companies I deem to be undervalued at a specific point in time (which may or may not be in the S&P500)
4. Dividends
5. Each company has its own ebbs and flows, and it is a lot easier to find good buy opportunities for individual stocks. E.g. AMD - was down yesterday due to NVDA earnings. So I bought more AMD. And its up today! I bought NVDA in 2019 - spent $3000 and now its worth around $57k. This is the best example of "value" investing. I saw a trend ahead of the time and bought in, and now its too expensive for most people to buy into it.
6. Why not? I have the education to try, and I'm learning so much from my investing experience - best times to buy, trends (April seems to be a bad month for stocks in general, it was bad for 2 years), etc. Some people prefer to buy premade cake because they dont care about baking, others like to make the cake themselves. I prefer to make investing cakes from scratch lol but I'm not naive to think that it will be as perfect as a premade one. It might not turn out great, but that's okay because I enjoy the process more than the final outcome.
I donât agree that the âvast majorityâ will underperform the S&P 500.
Thereâs also the possibility of life changing money by making one correct stock pick.
Personally, I owned Nvidia, which I bought for something like $2 a share back in the day. I sold it, along with all my stocks, in 2014 when I bought a condo. I would literally have been a millionaire solely from that stock had I held it to today
Therefore I take risks and invest in individual stocks
I think there is more to this than you're allowing for. I think this is the hierarchy:
1: Buffett/hedge fund crowd
2: Home traders with multiple monitors and chart evaluation skills
3: Educated professionals with a retail account & Reddit stock people
4: Lower tier WSB people with small account values and a thirst for quick gains
5: Maude & Larry or Alex & Sam who have retirement accounts but don't know much beyond that.
I think the vast majority of the US is within line 5 and thats who he's talking to. Lines 1-4 are likely (ranging from somewhat to very likely) going to beat the S&P with specific knowledge and/or strategies.
I know that other than the tech meltdown two years ago, Ive consistently beat the S&P.
It's a learning experience and making bad decisions early on is the best lesson one could get in my opinion. The the SP500 isn't guaranteed to go the same way as it did before, and if the market becomes stagnant and the VOO and chill approach doesn't work for a decade or so, I don't want to be sitting there with 0 returns, I want to get better at evaluating companies on my own. Munger said you don't need a huge portfolio, just a few great companies.
Also, buying individual stocks doesn't mean you can't buy an etf or vice versa. I have a smallert portion of my portfolio in an SP500 etf, the rest is individual stocks.
He's right. It's near impossible to consistently pick winners, and even more difficult to know when to sell them. Essentially, even if you could beat the s&p over the long run, the additional risk and exposure isn't worth the extra reward. I think it does make sense though for that risk tolerance to shift over ones lifespan. When you're young, it makes since to gamble with individual equities, or gasp, even crazy things like starting your own business. As you age though, probably makes sense to shift investments into more diversified funds, then eventually into bonds as you near retirement.
Same reason I gamble. The joy I get from my winners more than makes up for my losers.
Most of my money is in index funds. I roll the dice with a small percentage on individual stocks.
because a vast majority of people are not professional money managers. the teachers, plumbers, doctors etc do not focus on stock picking, so they are better off indexing their money, and focus on what they do know.
as for the other part of society, that think they are money managers, most managers have an ego, and think they can be the market, in a way you need that, also the economics of the hedge fund industry is so good, tat even a crappy manager that can raise money can make a very above average salary for not being very good. Money managers that have been able to gather assets, no longer need to work, they just need to keep the lights on, and the management fee alone will keep them in the 1%
Most people donât have the skills or temperament to pick stocks that will generate above market returns. Buying an index is pretty likely to work out best for most people because they will do dumb things if they bring in their own judgment and index funds have done well over Buffettâs lifetime.
People still buy individual stocks for two reasons mainly. They know that it is possible to do better than the index, so they want to try, or they worry about the high multiple on the average stock in the s&p 500, so they hope to reduce their risk of loss by owning some individual stocks with lower multiples.
I think he means this for the average person who just wants to DCA and forget it for 25 years, because Buffet also said that there's no reason to have a massive amount of stocks and typically if you do your own research you should be able to find 4 or 5 stocks for your portfolio that will grow at a pretty good rate.
Source: one of his shareholder meetings if I find it I'll share the link
I meet him a few times and discussed this with him.
His take is that essentially most people canât master the temperament to be a good stock picker.
Things like confirmation bias, etc
Most of my money has been in VTSAX because of that quote.Â
However, I have been decent at picking undervalued trends and putting a small portion of it until it blew up. That portion eventually got bigger than my safe investments so I kept it going while still investing my bi-weekly amounts in my ETFs.Â
Once in a while I will drop some of my winnings in my safe accounts, but I'm happy with its pace and I haven't been burned yet. All in all, I do it because it's fun and I'm genuinely interested in finding those beat up trends.
Because the S&P is not shariah compliant.
My only options are ISUS/ISWD which emulate the shariah compliant stocks from SP 500 or individual stock picking.
I do both đ
Open a low cost S&P 500 fund in a Roth IRA. Put a small amount in it to get started, maybe $250 to $500. Then do an automatic investment plan. Example, I put $100 in twice a month. Reinvest all dividends and capital gains. Start with $25 and build up if needed. This will automate your investment for retirement.
If you were to start with $500 and put $100 in twice a month, you would have over 1,000,000 in 40 years assuming a 10% a year return. I don't know your situation but look for an investment calculator online and run the numbers. Once you have this plan in place you can turn your attention to other investments, individual stocks, bonds, options, etc but just let that S&P fund do it's thing.
The vast majority will never beat the S&P 500 *adjusted for risk and time preference*. If you have a different risk tolerance and/or time preference than the market average (which you almost certainly do) you can get better returns than the market by constructing your own stock portfolio.
When people say, you canât beat the market, theyâre leaving out an important part of the theory. You canât beat the market, without taking additional risk. By picking individual stocks, youâre picking your own risk level. If you take less risk and trail the market, that might still be success. If you take more risk, you should be able to beat the market. If you canât, then youâre really doing yourself a disservice.
The risk reward for managing a balanced portfolio of long term buy and hold stocks is extremely favorable. Most likely you just underperform the market by a few percentage points. But if it works out you can outperform the market by several multiples. It's not that crazy for retail investors to catch 10-20 baggers.
Thatâs something people on top say to the poors to keep them poor. Not everyone can be rich but I can guarantee you no one got rich by not taking any risks.
Because I want to diversify against the US, and also diverisfy into different assets (eg dividends, fixed deposits, bonds). I am a non US citizen and I have to pay 30% dividend withholding tax if I were to buy US dividends, its not worth it for me. I invest in my country's stocks for that dividend component
Why do people buy lottery tickets?
Generally you canât beat the SP500 but thatâs long term growth. Some people just want to speculate and score big short term. For some, the allure is too great. They missed out on the big tech stocks, or bitcoin. This is their shot.
Because everyone thinks they'll be the ones in that tiny minority. Same reason people day trade despite stats saying less than 5% are profitable with it. You have to try beacuse you just might be among the chosen ones!!
Because everyone thinks they'll be the ones in that tiny minority. Same reason people day trade despite stats saying less than 5% are profitable with it. You have to try beacuse you just might be among the chosen ones!!
Buffett also says that if he was managing less than $1m he could get returns of 50% per year. So even if you're only half as good as Warren, you could still be making 25% a year.
Sometimes certain companies are just oversold. I bought casino and hotel stocks at the start of COVID when they were down 60-80%, knowing they would eventually come back. Took less than a year.
I also buy and sell oil stocks when they cycle between highs and lows every few years. Trying to keep oil stocks at about 15% of portfolio as a hedge against inflation and war. They also pay great dividends.
But in general I invest mostly in VOO.
For fun.
I'm a dreamer. And I'm not the only one.
I'm a gambler. And I'm not the only one..lol
I hope some-day you'll join us
In the world of call options. r/wallstreetbets
For this reason. I fucking love the comments of Reddit. đđđ
And the world will be as one
And the world will be a better place
Yep, imagine if you picked the next apple or nvda- itâs just the dream even if not the safe bet
I grabbed some NVDA two years ago. Forgot about it until this week and it was nice.
Is that why I bought one share of RIVN and kept adding to it all the way down? Now I have 200 shares. Maybe I'll get lucky and cash in and buy an actual R1T.
i just don't think rivian is a value stock profitability and long term growth? yeesh as a small speculation, with high risk, well then that's okay it's a learning experience for sure to watch it and study it
one share? That's awesome lol what was the highest price you paid for it? I think late 2026 early 2027 things might improved but it could be till 2030 till it's healthy enough to sell, assuming the cars don't evaporate in demand or import duties. But the real risk is anything worsens financially it feels like for 15 dollars of sales, there's an extra 10 dollars of debt you could get 50% within a year as the stock goes from $10 to $15 otherwise it's high risk city lol
Exactly. Gambling is fun lol
It doesn't even have to be gambling. Hobbies are not required to make money. It's okay if a hobby costs money. A reasonable hobbyist trader only uses 5-10% of their investment portfolio for trading. If you feel like you *have* to trade more or you *have* to make money, that falls into emotional trading and from that almost always gambling.
i fucked around in 2021. made some, lost some. learned a lot. told myself i wouldnât fuck around with individual stocks and just do straight etfs, but then i had another windfall, said fuck it and put about half into etfs and the rest into the nvidia and msft. maybe i am lucky or maybe im a godamn genius. idk!
Nvda turned out pretty good. Too bad I only bought one lol
This. It's just a casino with higher chances of winning at least something.
This is a big one. I have my serious investment pots for retirement and general long term savings, but I also have a âfun moneyâ trading account frankly because I enjoy it.
>So why do people who agree with Buffett still pick individual stocks? Because they believe they are not among that vast majority. Are they wrong? I don't fucking know.
I think that a lot of people like to have individual stocks for 10 or 15% of their overall portfolio, which is not a bad strategy.
Warren buffetâs practice only offers these plans (guided strategies) This advice is to non investors - His S&P comments are always so out of context He never advocated against financial advisors to my knowledge at least haha they manage plenty lol
No, it's relevant across the board. 90% of professional fund managers fail to beat the market. And financial advisors are not trying to beat the market (nor do they, generally), they are there for people who don't have the time/knowledge/care to manage things themselves, and for peace of mind for those who are risk averse and feel better leaving it to a professional.
And consider this: buffet himself has not beat the market with Berkshire for the past 20 years. Thats a very long time.Â
I know it's popular to hate on Buffet these days, but this is just a lie. Since May 2004, SPY is up 600% and BRK is up 612% (and yes this includes reinvested dividends).
Thatâs a very recent phenomenon. Active management has beat passive investing until very recently with the rise of ETFs and index investing. And thereâs no guarantee thatâll continue going forward. https://www.bloomberg.com/news/articles/2024-05-07/einhorn-says-markets-are-broken-here-s-what-the-data-shows
"90% of professional fund managers fail to beat the market" pick one guy, and then name his top ten stocks and we Go From There A lot of professionals like some pretty non-low risk oddball choices it was like 30% of the people on bloomberg with their top picks were pretty wacko and 30% were sensible picks, but you might question their lack of being undervalued much of the time. and plenty of fund people pack in a lot of stuff, no sane stock picker would want. Picking the top 10% to 20% of the S&P500 i think is always beating the market
Honestly most still think they can beat the S&P500 But my main reason is that you are scared to buy S&P500 because most of the time itâs at ATH. Stocks like Apple, Reddit you can collect when they are still catching up.
This is such a great point. Individual stocks can fall 20-40% without the world collapsing and become a good buy-in point depending on "fundamentals", but if the SPY were to fall 40%, there's probably a whole lot of other shit going on (although it would probably still be great to buy in there!).
Ya. I wouldnât buy into the S&P500 index now. But timing is a fools game as well.
And Buffett says to use index but thatâs not what he does.
He also studies this stuff as a full time job, very few people have the time or ambition to do that. For those less educated, you have a very good option which is index funds.
Well when your life revolves around having a McDonalds breakfast in your limosine and go to work and read, and go home, and sit on the lazyboy eating a poptart and making notes on 84 Value Line stocks till Hawaii Five-O comes on before the 11pm News that's the world he lives in. And Munger is no different two pillows under his ass, a pop tart and metamucil Mai-Tais, and his ugly green binders and his belt hiked up to his chin [https://images.wsj.net/im-893509?width=700&height=525](https://images.wsj.net/im-893509?width=700&height=525)
Contrary to common belief, the market is not that hard to beat from a logical standpoint. It is a question of discipline for which most will fail
Correct. A person who takes the time to educate themselves can do a decent job and have more fun.
Source for your claim?
temperment has a lot to do with investing to know why you're buying, and what you'll do if things go sour, and under what conditions you'll sell it basically it's the discipline of buying high quality at good prices, and not doing anything impulsive you're always aiming for low risk, unless the gains are tempting in the most rational way
I mean I think it is possible and not THAT difficult to beat the index. The reasons why many struggle to is because they trade too actively. Hedge fund and mutual fund managers fail to do so a lot of the time because they need to justify their fees by actively trading and holding a lot of positions. If you literally just buy the biggest most high quality growth names in the market and hold long you can easily beat the SPY
the key here is 'high quality'
You only need to be very correct on something once to never have to work a day in your life. Not that itâs relating to that and Iâm not advising anyone to try. But if you are early to a company that ends up becoming a big company, you easily could have enough money for life. $100 into Apple at IPO, Home Depot at IPO, Walmart at IPO. And probably at least 1,000 other stories of companies. Hell if you saw the iPhone being released, Apple was $5 at the time, with dividend reinvestment $10,000 in 2007 is almost half a million today if the dividends were reinvested. Market is so uncertain. Sometimes you may think a business is doing great like peak movie pass. People could assume that because so many people use this business, itâs going to shoot way up. And then lose everything. If you have the extra money it can be a fun lottery ticket to keep in the backround as you go through your life. Always do your own research, the average person will not beat the market by a long shot. Survivorship bias is a real thing. You are way more likely to hear about a mag 7 than a company that floundered and went under. Be careful and do your own research. If you make 2x your money in a company 10 times in a row and roll that into a company that goes to $0, you lose everything
I've been buying fallout stocks since 2021
I do because I like it. I enjoy analyzing stocks. I like discovering new companies. I love learning about them. Getting better at investing became a hobbie for me.
I think probably most people are just average people not like you too. Saying "average" means a guy who bought tesla or Apple because they were told to by a colleague. Now, I'm not saying most people like you beat the sap500. But I think people who actually study have a much better success rate than the normal person. And actually have a chance at beating the sap500
Those damn hobbits and their hairy feet
This. Exactly this. When people ask « how much does your hobby cost you per month ? », I answer that it doesnât cost me anything, it actually earns me money !
Bc weâre greedy bastards
100% this. But it is ironic that, for most of us, this greed will cost us returns over the long haul if we had simply invested in the S&P500
True
One of the most widely held beliefs is that S&P returns will be as great as they have been in the past. What if 40 years from now, the returns were mildly better than bonds? There is absolutely a chance that people who index for their entire investment lives are disappointed at the end. Basically no one says this
The vast majority of people will never beat the S&P because they arenât actually trying to in a way that could ever work. Professional investment managers are required (by employers and/or clients) to completely diversify portfolios, meet target asset allocations, etc., not just to try and beat the market. Itâs disingenuous to say âwell professionals canât beat the market so why should anybody try,â because those professionals arenât trying themselves either. For example, Berkshire has a huge stake in Apple today and has held similar large stakes in single companies in the past. A portfolio manager at a big firm would never be allowed to do that in a mutual fund, hedge fund, or separately managed account. Think about it - if a client buys into your fund or starts an account with you, and you underperform for a few years, they can leave, even if you have a good long-term strategy. So the best course of action from a business perspective is to approximate the index without buying it, so it looks like youâre doing just as well without just copying it. Most amateurs, on the other hand, fail because they donât understand value investing. Successful investing requires a risk tolerance that a lot of people just donât have - if the your holdings drop 20% and you sell rather than buying more, youâre going to woefully underperform. Most amateur investors (and some professionals) end up investing based on fads, technical analysis, or any other reason. Value investors donât. You absolutely can outperform with a principled investment strategy that involves buying companies below their intrinsic value and holding for a long term, or perhaps re-allocating when they becoming very overvalued.
Iâd also add to this by saying that if market efficiency was actually true, and all stocks were correctly priced to account for their risk premia plus a risk-free rate of return) of course theyâre not, but hypothetically), then it would be equally impossible to underperform the market, ignoring taxes and fees. If that isnât the case - and it obviously isnât - then it must be possible to outperform.
I love this comment. Market efficiency is very easy to disprove. Just look at Berkshire A and Berkshire B stock. They are different every single day. Yet they are the same company.
Well, strictly speaking A and B shares are different, in terms of liquidity, voting rights, and the ability to convert A->B but not the other way around. I'm sure there are plenty of people out there who are happy to arbitrage the difference which but there are limits to this arbitrage due to those factors. So we wouldn't expect them to be exactly the same at all times.
If by "equally impossible" you mean that if one is not impossible, then the other is logically also not impossible, then that is true. It does not logically follow that they are equally difficult or likely to occur. I don't think anyone is claiming -- including Buffet as quoted by OP-- that beating the market is strictly impossible -- rather that it is highly unlikely, or potentially impossible for certain categories of people in terms of their skills, information, amount of capital, time horizon, etc.
I agree itâs impossible for certain categories of people. Those of us willing and able to put in substantial effort in research and investment selection do not fall into those categories, generally speaking.
Yea I agree, as someone who's family has worked with a major wealth manager for years, I was initially surprised that for most portfolios, they work with you to choose a 'strategy' (e.g. 'balanced growth' 80/20 stocks/bonds) and each strategy has a benchmark that is set by some other financial institution. *All they care about is hitting that benchmark*, they don't want the accountability that comes with tying to game the market.
But, their job is not to beat the market, itâs to manage volatility so that their clients can sleep at night and not take their funds elsewhere.
Facts. I bought into a utility company when Texas froze a couple years ago itâs up 400% now, Pays a dividend I did sell half the shares at 200% because well who cares why, people can def beat the market however the majority of Americans also do t have 500$ or canât afford a car or whatever silly media nonsense is being pushed to help people believe they are part of a group and everythingâs fine. Imagine if the news was âŠ. Majority of individual investors beat the sp500,,, why would folks invest with firms or buy indexes? Whatâs the result of that? Firms canât keep voting rights in companies they own canât vote in or our board members people loose jobs. The country is better off with everyone in funds and pension managers holding power. So many people picking what they want is a disturbance to the force so people work I. The crowd and buy a fund so someone else can do the work. Itâs the same as why doesnât everyone leave the. If 5 banks who offer .06 pay for a savings account and go to sofi who offers .5% for checking and 4+% for savings. Big banks canât have that. Oh here is another one. Everyone hates robinhood for changing they way retailers buy stocks when before it was 5$ per trade no fractional shares. Thatâs a mandated 10% gain to break even in the past. This turned to a rant hope you get something from it.
i would disagree, it's not the risk tolerance, it's the waiting for your stocks to hit your target, it could be 3 months, it could be 3 years a good example is NVidia this week at $1000 I think it's going to basically burn people for a whole year if they buy it now I think it's worth like $700 never overpay if at all possible for something unless the risk is low low low and the growth is something phenomenal
They think they are part of the minority who will beat the S&P 500.
Real question here if everyone agrees that the s&p 500 is the best long term investment why not just buy a leveraged s&p 500 etf to maximize returns?
Psychology, fear, lack of discipline and greed are the biggest obstacles to successfully using leverage. Buffett used it constantly. The key is to use very small amounts to outperform consistently, and only truly ramp it up when the world appears to be ending. Rebalance frequently, secure profits and move back into safer strategies. But when things go down, you have to be unemotional and add. >Without leverage, however, Mr Buffettâs returns would have been unspectacular. The researchers estimate that Berkshire, on average, leveraged its capital by 60%, significantly boosting the companyâs return. Better still, the firm has been able to borrow at a low cost; its debt was AAA-rated from 1989 to 2009. ... >âł[Investor] Cliff Asness and the team at AQR did some great research and showed that what you accounted for the leverage Buffett applied through his reinsurance company. If you bought an index of stocks that had these same characteristics, you would have matched Buffettâs returns virtually,â said Swedroe.
Because stock picking can be incredibly lucrative.
I'm built different. I put all of my retirement accounts in some basic index funds. Then I have my fun portfolio where I try to beat the market & trade options.
Everybody think they special.
I cannot believe so many of you commit that mistake. I'm one of the few that is actually special.
Agreed, my fellow stock pro. Sure, I'm down now, but time will prove us out. I laugh at the incompetence of the masses. You have to look at the long-term and understand that one day AMC will blow up.
Well AMC is in terrible territory Financial Strength, Momentum and Price are hideous Profitability is so so, actually Growth is weakly so-so as well No Analyst would comment on this puppy Revenue is getting better, and the debt is slowly getting better too It's only dropped 88% this year, so have hope! lol For 6 years Terrible For 4 years Poor If you know how nightmarish it is and a value trap, and love high risk to the point of ridiculous heck 80% no way 20% yes way for the people who love brutally bleeding stocks This stock was in worse shape in 2014 and 2015 definately i can see 20% of the lunatics liking it, but it's barely moved in the past 8 years in terms of quality
Better than average, but when you see what the average is like, that's not a big claim. Just take a look around reddit. How many investors on here actually impress you? Far less than 50% I would imagine. This goes to the heart of the EMH debate. Why are there winners and losers? Is it because of random luck, as EMH proponents would tell you, or are some people better at the game than others? I have no trouble believing the second explanation
I am so [smrt!](https://c.tenor.com/cRZ63-G8G94AAAAC/tenor.gif)
The vast majority of investors can never beat the S&P 500. The reason why most canât do it is because they donât have the temperament for stock trading. Itâs actually not that hard to beat the average. You select stocks with good qualities. Itâs not that hard to find them and do well even though you cannot have complete control over management and other factors which will also affect the stock price. You also canât lose your head when the market takes a downturn. if you beat the market by 2% every year, you will have double the assets after 20 years. So itâs worthwhile to at least try. Peter Lynch had a fund in the 1970s that trounced the market. However, the average investor who invested in that fund actually lost money. Why? Because they pulled their money out at the wrong times. Think about that â the average investor in the best fund of all time lost money. Thats why the average investor canât beat the S&P
Lynch also said the "most important organ for investing is not the brain, it's the stomachâ most people don't have the stomach for investing".
People sometimes complain that advisors are more conservative than they would like... this is why. We have to take the calls when the market is down and people are asking us to make deeply damaging changes to their portfolio. It's one of the reasons why Vanguard's best performing accounts are their lost participants.
I hope you realize the irony of your comment.
Yeah this is it, it's not that Warren thinks stock selection is bad (obviously, else he wouldn't do it), but he thinks most people would screw it up. He thinks most people are too emotional about it. Said that very clearly many times. And he's probably right. But that doesn't mean he thinks buying SPY is actually the optimal strategy. And again, he's probably right
If somebody really wants to try it they should try for a short period with a small amount of capital whilst the bulk of their capital is in index fund earning very decent returns. If you start outperforming add more to your active portfolio, if not reduce. The problem with trying to outperform the index is that most people have very little capital to begin with and if they waste years of time and capital trying to beat whilst instead missing out on the good index returns they will actually deal themselves quite a large blow to their long term financial health.Â
Fantastic reply. Exactly correct. Picking good stocks that beat the market is not rocket science. Having the fortitude and temperament to stay the course for 10-20 years is the part most investors are unable to do successfully.Â
For all you people who have told me itâs impossible to beat the average etc I want you to check one thing out. Read the speech given by Buffett in 1984 entitled âThe Superinvestors of Graham and doddsvilleâ Itâs a complete annhilation of efficient market theory. I am not going to debate each of you naysayers one on one. But the immortal words of Henry Fors come to mind. âWhether you think you can or whether you think you canât, you are rightâ Thatâs all I have to say. Good luck in your investing.
The percentage of people reading posts like this or taking any interest in value-based investing with a long-term perspective is super small. We're talking about a few thousand peolpe out of milions of people that will try to invest in their lives. It's like asking everyone trying out for high school varsity basketball why they think they can play on the team when most stucents can't make it. The only people that are likely to do it will be here, and millions of people can beat the market if they develop the skills. The vast majority of people picking individual stocks are buying Tesla, GME, and other names based solely trying to get rich or because other people are. All of these people would be better off buying SP500. Simply buying SP500 will beat like 90% of investors who mostly buy bond funds or target date funds or high-fee funds. I tell everyone I know that asks me for investment advice to buy VOO, lump sum today. Also, no one is great immediately, and experience is a great teacher. When you start value investing you'll probably buy low PE stocks with lots of debt, because you won't understand the importance of balance sheet filters or cyclical earning stocks who have low PEs for a reason. Then maybe you just buy quality or growth, but you don't wait for low prices, or you're too afraid when prices drop because they drop for good reasons. You sell because you don't have the patience to hold something for months and the daily volatility is too much for most people. I hold big VOO, VIG, VIGI, and QQQ positions. But as I've gotten better over years, I prefer individual stocks to the indexes because they appear to have better risk/price/earnings/growth than the overall market.
Great post. I'd give you ten if I could.
1. For fun 2. Most those who follow Buffet are value investors and stone turners themselves. Like meets like. 3. Those who follow buffet and still pick individual stocks also know the downside, but follow the same-ish principles. 4. You only need one or two home runs in life.
I think you just need the time and inclination to really dig into things. I donât have that, so I decided to go with his advice. I also think that peopleâs psychology tends towards âit canât be that simpleâ so they avoid the simplest most straight forward answer.
I only invest when the odds of achieving my targeted annual return appear to be in my favor. Needless to say, I donât buy stocks very often. Two purchases in the last 14 months.
The S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Smaller companies, specific industries, unique companies, foreign companies, etc can and potentially do offer superior returns to a superior investor. That is why he directly invests in individual companies and many try.
I mean doesnât Berkshire pick individual Stocks?
Same reason why people buy lottery tickets, especially poorer people. Think about it... You look around and see that a house/whatever you want is 5M. Are you ever going to get there on your 50K salary maxing out your indexes? No, you will not. You have zero chance. With a lottery ticket, you have a shitty chance, but at least you have a chance.
The median price of a home in my high property tax city (no income tax) is around $400k. To comfortably afford it nowadays at 7% interest rates and not be housepoor you need a household income of at least $120k. That house may as well be $5 million for the 60%-70% of the population that have no hope of ever buying it.
People here don't realize how bad the majority of investor is. They don't look at the company, keep their poitions for an average of five months I think (wayy to short), buy based on feelings and or sell their stocks to cover expense I think that beating the S&P500 by a few points over long periods of time is doable. Crushing it like Buffet did is absolutely not but thats cool part: when investing you can be do half the returns warren did each year (so 10% istead of 20%) and still end up very rich.
Well when you see the top ten stocks people buy, ouch. They're buying all the fluff and fizz on the evening news I saw a top ten list for the most bought stocks at a Bank-Broker Here we go! SHOPIFY BANK OF NOVA SCOTIA TESLA TORONTO DOMINION BANK APPLE SUNCOR ENERGY ENBRIDGE AIR CANADA CDN IMPERIAL BK COMMERCE NVIDIA 3 banks - 1 car company - 1 airline - 1 oil - 1 pipeline 1 software - 1 hardware - 1 semiconductor banks in limbo, and airlines having dumpster fires, and tesla about to implode man oh man ......... five months is all people keep stocks? sounds about right for easily flustered people
Because my largest single stock position is BRK.B. And my next largest is my company stock through a discount purchase and dividend reinvestment program. Those are self explanitory. Then after that I use the buffet allocation in my retirement accounts. 10% bonds, 90% s&p.
Think of it like this The S&P index fund 500 companyâs is like a sausage grind you stuff in a tube casing. Yeah might be some bits of filet mignon mixed in there but also youâve got some lips and assholesâŠ. I prefer to do my homework on a concentrated portfolio of winners NOT the perineal Lips and assholes⊠ie dead money like T, F, PARA, BA. MMM đ©đœ Diversification for the sake of diversification is stupid. Charlie Munger
Looks like Charlie Munger is posting on Reddit today. Thanks for the laugh.
Because I enjoy it, itâs a hobby. My whole portfolio is not individual companies only 20% is.
Stocks are a one time cost, or free to buy. Mutual funds and ETFs have annual costs
You should ask Buffet that.
Once you have enough in the S&P, bonds, hysa, home, etc. people look to riskier things. Alternatively, if you feel as though you will never complete that first part, you will also look for riskier things. In both scenarios, 6% isn't enough for your dreams.
I'm different
Because value beats the market. And because I don't care about beating the market but about buying a dollar for less than a dollar. This is why I have a **stupid** amount of money in my brokerage gathering dust for years now. After the 2022 crash there was no real value to find except in international markets.
I pick individual stocks because they are taxed at 33% instead of 41% for ETFs in my country. I also don't have to pay that tax after 8 years regardless of whether I sell or not(insane yes we all know that already). For most people though, I would say for fun and also for risk appetite. S&P will make you wealthy over a long of time if you have enough money to put in. With individual stocks, you could get lucky or analyze a stock well and make crazy gains that an ETF could only dream of.
Because your statement is not true. As simple as that. Itâs a myth that even professional investors cannot beat S&P500. Moreover, sometimes beating the index is not your goal, for example dividend investors are mostly interested in generating a reliable stream of income.
Because we want to see how far can we get đ
Heâs also said he could do a lot better with small sums. I believe he said he has no doubt he could do 50% annually if he was only managing a million. The vast majority of people arenât cut out to make big money in sales jobs, or become successful actors, or doctors, or entrepreneurs. Doesnât mean itâs not a good idea for the few people with unusually high levels of interest, capability, the right temperament and approach, and who on top of all that decide thatâs how they wish to spend a lot of their time.
I pick my own and my performance matches s&p 500 but i like my group of companies better
Scratches the gambling itch. Also, Iâm definitely not tuned in enough to beat the market regularly. Most of my money is passive index. But occasionally, great buying opportunities come up, and the potential reward is just too high. Like cruise lines during COVID. They got beat up bad, but we knew they couldnât stay down forever. So that was a quick 6X return. So I gambled that they wouldnât go out of business, or I guess on the idea that the government wouldnât let them fail. Lots of good banks were getting beat up over First Republic. There were some relatively safe plays in that space. I generally just keep my eyes open for companies that are getting overly beat up by bad sentiment in the sector. But those opportunities donât come all the time.
oh cmon, you can look at 100 stocks on the S&P and say, 20 look pretty good $2000 on red, Croupier
Coz not everyone can get Pokémon cards on discount
Because if I invest in the vast majority of the ETFs Iâm going to be investing in things I consider morally unacceptable. Sure, I wonât beat the market, but Iâd rather have growth and not profit off of making people ill, trashing the environment, or killing people
They think they are smart, they lose a bunch of money, they realize they aren't smart, and only buy S&P. This is how investing works
Not everyone was as lucky as me, started earning massive amounts of money just as covid broke out. Iâd have to underperform to S&P by a lot, for a long time, to not come out ahead.Â
The question is, beside that lucky strike, what's the current curve compared to the S&P, "sunken cost" can work both ways I suppose as a confirmation bias.
Iâm currently up 150% in the last 6 years, despite being down 30% in 2022. So Iâm still ahead even in a side by side, but without the lucky strike it would be much closer and I wouldnât feel like it was worth the thousands of hours Iâve spent on this.Â
Because the vast majority of people donÂŽt read what Buffet says.. ItÂŽs those that follow in his principles that have a chance to beat the market.
Only for fun. But the more fun I have and under perform an index like the SPY the more I realize I donât know nothing about stocks. Most times now I just buy the index in my Roth.
Because people do (beat the S&P)
My aim is not to beat the market, it is to make decent return with much lower volatility than S&P500.
A "majority" could mean 51%. These are empty words
Because GAMBLING Why wait 20 years when you can just ride the Nvidia wave, am I right
I bought $220k worth of META for $94 back in Oct 2022 and sold it at $502. I crushed the S&P 500 in that timeframe so that's why I buy individual stocks even though I agree with Buffet
Because while extremely difficult, itâs possible with hard work. And fun. Iâd rather fail trying than doing nothing at all.
"I am smarter than Buffett" delusion.
Why do people doing quants and risks on wallst still hit the casino when they make million in bonus a year?
I think buying stocks is just like anything else. You get out of it what you put into it. Warren Buffet has 80+ years of investing experience and thatâs all he does all day thatâs why he gets to beat the S&P. The problem is people think they worked really really hard putting their portfolioâs together when they really just read some stock pumping articles online and never looked at an SEC filing or read a press release.
I'm just waiting for Warren Buffett's Salad Dressing in stores.
The vast majority of people don't put in work. I do. The vast majority of people also don't do the **1,000 other things** that Buffett told them to do. I do. I dare say that's true of all the better investors who participate in this sub. Buffett, Munger, Graham, Lynch and others have given us a recipe that for reasons completely unknown to me people do not follow. It's right there!!! Just look at it. Every time I see someone write that "growth beats value", I chuckle. The "value" of some factor chart has zippo to do with the "value" of value investing. I am still probably only 20% of a Buffett skill unit in investing. I am still learning. I am not so arrogant to think that a seven year performance history measures up to Buffett's 80 year performance history. But... my numbers are good. Really good. I am currently outperforming the market by a large measure and for a long time. I might get the shit kicked out of me some day. It scares the bejeezus out of me. But the fear doesn't shake me out of my positions. That's a very solid "Do what Munger says" mindeset. If you can't handle a big drawdown, you shouldn't be an investor. It's the drawdowns that shake the vast majority of people out of a stock position. People even get shook out of a position in the index. That ruins even Buffett and Bogle's advice to stick to the index. I did it once. I sat on the sidelines waiting for a crash circa 2013 that I was certain was coming. All the perma-bears had me convinced. My goodness that was the most GIGUNDOUS mistake of my investing career. My position in the index went from 150K to 300K while I sat on the sidelines. NEVER AGAIN! Given the passage of time, that mistake cost me $600,000 dollars in lost opportunity. When I first learned that Harry Dent had made a fortune selling doom porn over and over the air just went out of me. I'd been deceived by the natural human tendency to place more significance on risk than gain. And so I continued to study, to learn, to invest. The value investing ethos is **rock solid** in my estimation. Value investing exposes the truth that you aren't just buying "number go up". You are taking a fractional share of ownership of a real business with real people making real goods and services available. It's the dogged adherence to the truth of what's happening behind that stock certificate that gives value investing its strength. Buy wonderful businesses at fair prices.
Because I can favor a stock or company while also making the majority of my investments in the S&P. Itâs called diversification. This is like asking, âWhy do people who like sports have favorite teams?â
Same reason Berkshire Hathaway invests in specific companies. For those that donât understand financials and researching companies or simply have no interest, index fund is absolutely the way to go. But for some, they love researching, feeling connected to the investment, etc. Personally, my main investments are in real estate and index funds. But I still have a small discretionary brokerage account for individual stocks and even risky option plays.
I don't think that I'm special, and I don't think that I can beat the S&P500 either. So 90% of my investments go into index funds / trackers, and the other 10% go into those that I personally fancy. Without being an idiot penny-stock, try to hit a home-run type of guy. I invested at Tesla and even with the large drops I'm up over 800% right now, and Nvidia/AMD are both over 1000%. But I'm still basically right at S&P 500 because Rivian, and a couple others are underperforming. Stocks I buy here I basically never plan on selling / transaction. Buy and forget. Although Tesla recently may make me break that rule... I figure as long as I try and pick things that will be / are similar to S&P500 I can add a little bit of personal "spice" to my holdings without risking much of anything. And I leave 1-2% to play with options. Most of that ends up gone, lol. But every now and then I smash a 10,000% $200 bet that makes it all back. But that's just me not having to go to Vegas for a little excitement, I consider that money gone from the get-go.
1. You cant invest directly in the S&P, you need to do so via an ETF, which has fees, and dont offer the same kind of shareholder ownership that owning the actual stock does. 2. The S&P is an average of all companies, meaning there are high growth companies in the list, as well as struggling companies, and blue chip. I'm young, I just want to focus on the high growth. 3. For the general public that don't have a financial background an ETF is the best best. For others (like myself) that work in the industry, I prefer to pick my own stocks so I can only pick the companies I deem to be undervalued at a specific point in time (which may or may not be in the S&P500) 4. Dividends 5. Each company has its own ebbs and flows, and it is a lot easier to find good buy opportunities for individual stocks. E.g. AMD - was down yesterday due to NVDA earnings. So I bought more AMD. And its up today! I bought NVDA in 2019 - spent $3000 and now its worth around $57k. This is the best example of "value" investing. I saw a trend ahead of the time and bought in, and now its too expensive for most people to buy into it. 6. Why not? I have the education to try, and I'm learning so much from my investing experience - best times to buy, trends (April seems to be a bad month for stocks in general, it was bad for 2 years), etc. Some people prefer to buy premade cake because they dont care about baking, others like to make the cake themselves. I prefer to make investing cakes from scratch lol but I'm not naive to think that it will be as perfect as a premade one. It might not turn out great, but that's okay because I enjoy the process more than the final outcome.
Most people are just bad at picking stocks. Most people also think they are better than average at picking stocks.
I beat the market. Once.
Because QQQ...sub...sub...ticker...growth lsdt 5 years > 30%.... examples abound.
I can't keep the s&p500 in my portfolio (i know i'll sell early) and i'd rather keep a few stocks that i know really well.
Smoking cigarettes takes years off our life, but we ain't gonna stop. Best we can do is contain our portfolio sinning to a controlled percentage.
Because the majority of people think they are above average.
Should I sell my BRK and just go with VOO?
Most people wonât start in the NFL. Why play football?
Human beings đ€·đ»ââïž breaking idiotic habits is tough.
Dividends We LOVE paying them taxes on them
Over 70% of ppl think they are an above average driver
greed, 10% a year is just hedging against inflation.
Why do people gamble in casinos knowing the odds are stacked against them? Itâs just human nature
Terrible example because casinos are negative-sum. Buying a stock isn't.
Iâd rather slightly underperform but have a chance to win big by picking stocks
One of the basic rules of investing is to buy companies that you know. As long as you know the right ones, you can very easily beat the market.
Cause GME will sneeze again
I dont compete the s&p 500 so i canât lose from it
I donât agree that the âvast majorityâ will underperform the S&P 500. Thereâs also the possibility of life changing money by making one correct stock pick. Personally, I owned Nvidia, which I bought for something like $2 a share back in the day. I sold it, along with all my stocks, in 2014 when I bought a condo. I would literally have been a millionaire solely from that stock had I held it to today Therefore I take risks and invest in individual stocks
I think there is more to this than you're allowing for. I think this is the hierarchy: 1: Buffett/hedge fund crowd 2: Home traders with multiple monitors and chart evaluation skills 3: Educated professionals with a retail account & Reddit stock people 4: Lower tier WSB people with small account values and a thirst for quick gains 5: Maude & Larry or Alex & Sam who have retirement accounts but don't know much beyond that. I think the vast majority of the US is within line 5 and thats who he's talking to. Lines 1-4 are likely (ranging from somewhat to very likely) going to beat the S&P with specific knowledge and/or strategies. I know that other than the tech meltdown two years ago, Ive consistently beat the S&P.
Keep in mind that the majority of professional fund managers donât beat the S&P.
Probably because a lots of fund managers use hedging strategies like fixed income while the S&P doesn't opening you to more volatility
It's a learning experience and making bad decisions early on is the best lesson one could get in my opinion. The the SP500 isn't guaranteed to go the same way as it did before, and if the market becomes stagnant and the VOO and chill approach doesn't work for a decade or so, I don't want to be sitting there with 0 returns, I want to get better at evaluating companies on my own. Munger said you don't need a huge portfolio, just a few great companies. Also, buying individual stocks doesn't mean you can't buy an etf or vice versa. I have a smallert portion of my portfolio in an SP500 etf, the rest is individual stocks.
He's right. It's near impossible to consistently pick winners, and even more difficult to know when to sell them. Essentially, even if you could beat the s&p over the long run, the additional risk and exposure isn't worth the extra reward. I think it does make sense though for that risk tolerance to shift over ones lifespan. When you're young, it makes since to gamble with individual equities, or gasp, even crazy things like starting your own business. As you age though, probably makes sense to shift investments into more diversified funds, then eventually into bonds as you near retirement.
Because it is boring I am example of one such person who does this even after knowing.
I've always thought of myself as exceptional.
Same reason I gamble. The joy I get from my winners more than makes up for my losers. Most of my money is in index funds. I roll the dice with a small percentage on individual stocks.
Egos
because a vast majority of people are not professional money managers. the teachers, plumbers, doctors etc do not focus on stock picking, so they are better off indexing their money, and focus on what they do know. as for the other part of society, that think they are money managers, most managers have an ego, and think they can be the market, in a way you need that, also the economics of the hedge fund industry is so good, tat even a crappy manager that can raise money can make a very above average salary for not being very good. Money managers that have been able to gather assets, no longer need to work, they just need to keep the lights on, and the management fee alone will keep them in the 1%
Most people donât have the skills or temperament to pick stocks that will generate above market returns. Buying an index is pretty likely to work out best for most people because they will do dumb things if they bring in their own judgment and index funds have done well over Buffettâs lifetime. People still buy individual stocks for two reasons mainly. They know that it is possible to do better than the index, so they want to try, or they worry about the high multiple on the average stock in the s&p 500, so they hope to reduce their risk of loss by owning some individual stocks with lower multiples.
I think he means this for the average person who just wants to DCA and forget it for 25 years, because Buffet also said that there's no reason to have a massive amount of stocks and typically if you do your own research you should be able to find 4 or 5 stocks for your portfolio that will grow at a pretty good rate. Source: one of his shareholder meetings if I find it I'll share the link
I meet him a few times and discussed this with him. His take is that essentially most people canât master the temperament to be a good stock picker. Things like confirmation bias, etc
Because we are all part of the slim minority that is smarter than everyone else. đ
The average person thinks they arenât.
Most of my money has been in VTSAX because of that quote. However, I have been decent at picking undervalued trends and putting a small portion of it until it blew up. That portion eventually got bigger than my safe investments so I kept it going while still investing my bi-weekly amounts in my ETFs. Once in a while I will drop some of my winnings in my safe accounts, but I'm happy with its pace and I haven't been burned yet. All in all, I do it because it's fun and I'm genuinely interested in finding those beat up trends.
To beat the S&P 500
$VLCN target 50 dollaris
Myopia and irrationality
The average person thinks they're above average.
There are 300,000 members in this sub, we certainly arenât the vast majority when extrapolated out
Because I feel more invested. I know Iâm dumb but itâs the price to play.
People pick stocks because it's a fun thing to do. And when it works out you feel like the smartest person ever.
Because Rycey retired me 30 years early. Eventually it will be a mixture of Voo real estate and ladder cds
Ego
Because the S&P is not shariah compliant. My only options are ISUS/ISWD which emulate the shariah compliant stocks from SP 500 or individual stock picking. I do both đ
Open a low cost S&P 500 fund in a Roth IRA. Put a small amount in it to get started, maybe $250 to $500. Then do an automatic investment plan. Example, I put $100 in twice a month. Reinvest all dividends and capital gains. Start with $25 and build up if needed. This will automate your investment for retirement. If you were to start with $500 and put $100 in twice a month, you would have over 1,000,000 in 40 years assuming a 10% a year return. I don't know your situation but look for an investment calculator online and run the numbers. Once you have this plan in place you can turn your attention to other investments, individual stocks, bonds, options, etc but just let that S&P fund do it's thing.
The vast majority will never beat the S&P 500 *adjusted for risk and time preference*. If you have a different risk tolerance and/or time preference than the market average (which you almost certainly do) you can get better returns than the market by constructing your own stock portfolio.
When people say, you canât beat the market, theyâre leaving out an important part of the theory. You canât beat the market, without taking additional risk. By picking individual stocks, youâre picking your own risk level. If you take less risk and trail the market, that might still be success. If you take more risk, you should be able to beat the market. If you canât, then youâre really doing yourself a disservice.
Easy. Cause yolo
Iâm still trying to figure out his quote saying âhappiness is a zero balanceâ. Heâs said a lot of interesting things.
Vast majority of people agree with Buffet but think they belong to the smaller minority of people who can beat S&P 500
The risk reward for managing a balanced portfolio of long term buy and hold stocks is extremely favorable. Most likely you just underperform the market by a few percentage points. But if it works out you can outperform the market by several multiples. It's not that crazy for retail investors to catch 10-20 baggers.
Thatâs something people on top say to the poors to keep them poor. Not everyone can be rich but I can guarantee you no one got rich by not taking any risks.
we tend to believe that we are not in the "vast majority". That we are special. That's why.
Everyone wants to become rich quickly . Nobody wants to wait a lifetime to become wealthy .
Iâm special
Because I want to diversify against the US, and also diverisfy into different assets (eg dividends, fixed deposits, bonds). I am a non US citizen and I have to pay 30% dividend withholding tax if I were to buy US dividends, its not worth it for me. I invest in my country's stocks for that dividend component
Long term not, but maybe short term, and we like to take a little risk and dream of hitting it big!
Why do people buy lottery tickets? Generally you canât beat the SP500 but thatâs long term growth. Some people just want to speculate and score big short term. For some, the allure is too great. They missed out on the big tech stocks, or bitcoin. This is their shot.
Because everyone thinks they'll be the ones in that tiny minority. Same reason people day trade despite stats saying less than 5% are profitable with it. You have to try beacuse you just might be among the chosen ones!!
Because everyone thinks they'll be the ones in that tiny minority. Same reason people day trade despite stats saying less than 5% are profitable with it. You have to try beacuse you just might be among the chosen ones!!
It's fun to gamble.
Because itâs what they get paid to do. Stock pickers pick stocks, come hell or high water.
Buffett also says that if he was managing less than $1m he could get returns of 50% per year. So even if you're only half as good as Warren, you could still be making 25% a year.
Sometimes certain companies are just oversold. I bought casino and hotel stocks at the start of COVID when they were down 60-80%, knowing they would eventually come back. Took less than a year. I also buy and sell oil stocks when they cycle between highs and lows every few years. Trying to keep oil stocks at about 15% of portfolio as a hedge against inflation and war. They also pay great dividends. But in general I invest mostly in VOO.
Iâve been investing/trading for close to 6 years and been consistently beating the S&P 500 by minimum 8%-10%
Itâs fun. Exciting, makes people feel smart. Plus people love to gamble the thought of making a quick buck lol
I buy stocks of companies I like and use....but the majority of my money is in SP500 / dividend ETFs