The Myth

There is a growing movement among investors today away from active management or "stock-picking" strategies and toward the use of index funds. The reason is simple: For many years, the vast majority of those strategies which involve the buying and selling of individual stocks have consistently underperformed the S&P 500.

Wall Street has been selling the myth for decades that their stock-picking expertise could "beat the market"...and they have failed to deliver!

"The stock-picking mystique is so deeply entrenched in our financial culture that it feels like heresy to suggest that it is, on balance, dumb. The facts are clear, however. For the vast majority of investors—including professionals—stock-picking efforts waste both money and time."

                                                                                   ...Business Insider

"Stock-picking fund managers are even worse than we thought at beating the market...the S&P 500 outperformed more than 92% of large-cap funds over the last 15 management clients may actually just be paying someone to shuffle their investments around!" 

                                                                                   ... Fortune Magazine     

"University endowments, like many money managers, have a hard time beating the market. New figures show that these big investors missed the decade long rally in U.S. stocks by a long shot!"


                                                                                        February 2, 2020

"The body of evidence...some would say brute so abundant as to defy substantive rebuttal. The facts are: (a) most professional managers fail to outpace appropriate market indexes, and (b) those who do so rarely repeat in the future their success in the past."

                                                                                      ...John Bogle

                                                                                      Chairman, The Vanguard Group

"There’s this idea out there, perpetuated by financial professionals and online “experts” alike, that if you take the right approach, do the right research, and put in the right amount of effort, you can pick stocks that beat the market. Their pitch is appealing. They make it sound like it’s pretty simple to beat the market if you have the right information and the right discipline. Unfortunately, most of it is garbage!"

                                                                                     ..."The Simple Dollar"

"A blindfolded monkey throwing darts at a newspaper's financial pages could select a portfolio that would do just as well as one carefully selected by the experts."

                                                                                 ...Burton Malkiel

                                                                                   Economist, Princeton University

                                                                                  "A Random Walk Down Wall Street"

"We continue selling what most of us have not delivered and, realistically, will not deliver...beat the market investment performance. Most investors have not yet caught on." 

                                                                                  ...Charles Ellis

                                                                                       Founder, Greenwich Associates 

"Don't Be Fooled: Stock Picking Is Still A Loser's Game!"



Morningstar Effectively Dumps On Its Own Business!


"A low-cost index fund is the most sensible equity investment for the great majority of investors. By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals."

                                                                                           ...Warren Buffet

Finally, as to the danger of listening to "experts", watch as CNBC's Jim Cramer takes investors down the drain!  A must view!




Bottom line: Investors who own and trade individual stocks...whether they do it themselves or pay somebody to do it for them...should realistically accept that they will probably underperform the S&P 500. The statistics don't lie, nor does the ongoing trend toward index funds.

However, whether or not they continue with stock-picking strategies or index funds, there is an even more important issue: Both approaches will inevitably experience severe declines once in a while. 

To match the S&P in good years...which even the "pros" can't seem to do...but lose little or nothing in the down years, there is an even better strategy.