Indexing vs. Individual Stocks

Indexing vs. Individual Stocks

Everyone in this community always says “VTSAX and relax” and other similar phrases.  This is great and all, if you want to barely keep up with the market. Why would you want that, when you could shoot for the stars?  For the last century, the market has gone up about 8% per year. While this is fine and can make you a millionaire in a reasonable amount of time, this is nothing compared to choosing winners.

Warren Buffet has billions, and he got there from choosing individual stocks.  Ignore the index, and find the winners. There are 253 trading days per year, and on each of these there are big individual movements, but the market tends to cancel this out and avoids the volatility in the long run.  Some of the biggest movers are usually around 20-30% in either direction. The trick is to avoid the ones that go down. If the swings go that high, that means there’s a bunch that return around 8% (what you’d traditionally hope for over a year!).  If you simply pick one of these each and every day, for a measly 8% return, in just one year starting with one shiny little penny, you’ll end up with a cool $2.6M at the end of your one year.

The options are to either do this or be boring and wait it out and maintain a savings rate.


Choice is yours.  I know what I’m gonna do.

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