Select stock by yourself is too difficult
In my latest book, “Investors Beautiful Heaven“, I devoted a significant portion to presenting numerous facts, statistics, and my own thirty years of experience—the conclusion being that “most investors” are not suited for active investing; in other words, self-selecting stocks will only lead to the loss of your hard-earned money. Detailed arguments, facts, and statistics will not be repeated here; please refer to the book for more information.
Of course, I know that most people disagree with this view; but this is the main reason why only a very small number of investors succeed, and why only a minority make big money in the stock market.
In short, for the vast majority of investors, the difficulty of self-selecting stocks is simply too high.
Character is paramount
Warren Buffett often says that emotional control and a long-term perspective are more important than IQ or how hard you work. Gladwell’s “10,000-hour rule” focuses on skill accumulation, but Buffett’s philosophy focuses on behavioral consistency.
He once said:
“Success in investing doesn’t correlate with IQ once you’re above the level of 125. What you need is the temperament to control the urges that get other people into trouble.”
Most investors should’t do active investing
There are three main reasons why the vast majority of people should not participate in the stock market through active investing, meaning that most investors are not suited to self-selecting stocks:
- Stock market investing is a highly specialized field.
- Only a very small number of people are personality-suited to the stock market and will succeed; and personality is ultimately the most important factor determining your success.
- Most people are unwilling or unable to dedicate more time each day than an eight-hour workday to researching fundamental investment work.
Unless you are willing to dedicate the same amount of time as a regular job to active investing, have a strong grasp of a particular industry in your area of expertise, and have a suitable personality; if all three conditions are met simultaneously, I personally believe that the odds of success with individual stock investing are relatively high.
Conclusion
Buffett acknowledges the importance of luck, timing, and environment—for example, being born into a capitalist society, studying under Benjamin Graham, and having early access to investment opportunities. However, the book “Outliers: The Story of Success” simplifies practice equals success” into a simplistic formula, ignoring these subtle differences.
Related articles
- “Select stock by yourself, average person should not“
- “The power of index ETFs underestimated“
- “A table comparing S&P 500, Nasdaq, Dow Jones, Philadelphia Semiconductor Index over the years since its inception and annualized returns“
- “Investors should care annualized rate of return (IRR), How to calculate?“
- “Most investors should invest ETFs tracking broader market“
- “US issued ETFs tracking US market is your best bet“
- “Top 10 ETFs and important major US stock market index“
- “Consequences of Index Fund and ETF Regulations and Restrictions“
- “Stocks Better than the S&P 500, Procter & Gamble (P&G) “
- “Investors turn to passive investment funds ETF and abandoning active investment funds“
- “Global stock markets performance comparision over the past 30 years in a table“
- “S&P 500 vs. Nasdaq 100 index, how to choose a market index?“
- “S&P 500 index next year performance, based on last century record“
- “Return rate comparison among Buffett portfolio, Berkshire stock price, S&P 500 over the years“
- “2022 S&P 500 Constitutent Stocks Performance“
- “Stocks Better than the S&P 500, Procter & Gamble (P&G)
- “S&P 500 vs. Nasdaq 100 index, how to choose a market index?“
- “S&P 500 index, the only stock worth holding forever“
- “Querier to Annualized rate of return for S&P 500 Index“
- “Querier to Annualized rate of return for Dow Jones Industrial Average (DJIA) Index“
- “Querier to Annualized rate of return for Nasdaq Index“
- “S&P 500 P/E ratio has been rising in the past century, S&P 500 PE Ratio and Average Querier“
- “Querier to Annualized rate of return for Philadelphia Semiconductor Index (SOX)“
- “Querier to Annualized rate of return for Taiwan Stock Exchange“
- “How does BlackRock, the world’s largest index and asset management company, make money?”
- “Doom to fail if you’re not good at investing“
- “Outliers – great finding on 10000 hours“
- “Statistics can be deceiving“
- “The most important quality for an investor is temperament, not intellect”
- “Memory is an edge to investment success“
- “Personality has a decisive impact on investment success or failure“
- “Investors’ DISC test to assess your traits“
- “The importance of circle of competence“
Disclaimer
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
