One needs to be a stock picker

Often we hear of investors who are constantly beating the crowds. A cut above the others. The investors who beat the index by far.  The super investors. This constant barrage of information of other investors beating the market by cleverly selecting the winners leads us to believe that we all need to be super investors too.

And here in lies the biggest risk that most investors expose themselves to. The feeling that the only way to win in the investment process is by picking the winning stocks. And very often these winning stocks happen to be recommendations from random acquaintances. Can everyone really pick the winning stocks? The process of selecting multibaggers can be daunting.  The path can be full of landmines. Not everyone can be a Warren Buffet. And yet almost everyone wants to be one and many even believe that they need to be one.

A safer path for most investors is to diversify the risk by buying the entire market or a broad index. In the words of the legendary Jack Bogle, buy the haystack. In other words, don't try to pick stocks. Instead buy the index or the broad market. A safer and yet a rewarding approach is to buy the entire market. Ride the wave of the entire market. Often referred to as Index investing, the key principle is that instead of taking on the risk of choosing the winning stocks, it is better to buy the entire index. 

The concept of index funds was made famous by Jack C Bogle, an american legend. He argued that a safer for the retail investors was to buy an index fund which represents a group of stocks that represent a broad set of industries and sectors. By investing in index funds, one takes away the risk associated with specific stocks and only aims to replicate the returns of the market.

Watch my video about The Principles of Investing by Jack Bogle

In summary, successful investing does not require you to be stock picker. Not everyone needs to be a Warren Buffet or Vijai Khedia. You can achieve tremendous success in investing by not being a stock picker and exposing yourself to a huge risk. Take the less risky path. Buy the index and sit back and relax

Read this other very interesting blog post, Buy The Hay Stack