Why not?
Mainstream personal finance advice is pitiful.
There's wide consensus that ETFs are a bubble. On the other hand, the notion that buying an individual stock is equivalent to gambling is nonsense.
Mainstream personal finance advice is pitiful.
There's wide consensus that ETFs are a bubble. On the other hand, the notion that buying an individual stock is equivalent to gambling is nonsense.
Beating the index is a zero-sum game, for every winner there must be a loser. Of course you can make educated choices based on the fundamentals but the same is true for sports betting too. Unlike sports betting, you are directly competing against a large number of pretty smart people who play this zero-sum game as a full time job. And some of them even have inside information.
Not that it's impossible to win of course. I can easily imagine someone with deep expertise in a certain area having a key insight about a specific company that others don't, or someone who analyzes company balance sheets and business fundamentals to come up with an independent valuation being above-average at that. It's hard to imagine that either of these groups represent the average person who will trade fractional shares on Robin Hood though.
(This is not hypothetical it is actually happening)
Which could be, but isn't an argument for buying individual stocks instead of the index, since that doesn't avoid the problem.
In one view of the market, this is what all those hedge funds are paid to do. They keep the prices correct and extract some money, while everyone else indexes and pays them a small fraction of their returns. Of course, hedge funds aren't getting much of that pie these days.
Companies always face a reckoning point, on their individual timelines.
It's just arbitrage 101. Nothing stays mispriced forever. And the sooner the "other side" figures it out, the quicker prices correct -- so you've got to be fast. Which is exactly what sophisticated investors are.