There are two problems with trying to pick stocks. The first is that most stocks suck:<p>> <i>We study long-run shareholder outcomes for over 64,000 global common stocks during the January 1990 to December 2020 period. We document that the majority, 55.2% of U.S. stocks and 57.4% of non-U.S. stocks, underperform one-month U.S. Treasury bills in terms of compound returns over the full sample. Focusing on aggregate shareholder outcomes, we find that the top-performing</i> 2.4% of firms <i>account for all of the $US 75.7 trillion in net global stock market wealth creation from 1990 to December 2020. Outside the US,</i> 1.41% of firms <i>account for the $US 30.7 trillion in net wealth creation.</i><p>* <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3710251" rel="nofollow">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3710251</a><p>> <i>Four out of every seven common stocks that have appeared in the CRSP database since 1926 have lifetime buy-and-hold returns less than one-month Treasuries. When stated in terms of lifetime dollar wealth creation, the best-performing</i> four percent of listed companies <i>explain the net gain for the entire U.S. stock market since 1926, as other stocks collectively matched Treasury bills. These results highlight the important role of positive skewness in the distribution of individual stock returns, attributable both to skewness in monthly returns and to the effects of compounding. The results help to explain why poorly-diversified active strategies most often underperform market averages.</i><p>* <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447" rel="nofollow">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2900447</a><p>> […] <i>Since 1926, the median ten-year return on</i> individual U.S. stocks relative to <i>the broad equity market is –7.9%,</i> underperforming by 0.82% <i>per year. For stocks that have been among the</i> top 20% <i>performers over the previous five years, the median ten-year market-adjusted return falls to –17.8%, underperforming by</i> 1.94% <i>per year. Since the end of World War II, the median ten-year market-adjusted return of recent winners has been negative for 93% of the time. The case for diversifying concentrated positions in individual stocks, particularly in recent market winners, is even stronger than most investors realize.</i><p>* <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4541122" rel="nofollow">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4541122</a><p>Just because a stock is good now, does not mean it will be in the future. And just because it sucks now, doesn't mean it will continue to. You have to constantly evaluate things, and Ain't Nobody Got Time For That.<p>And secondly, just because <i>some</i> people may actually have the skill to consistently pick winners (over decades), why do you think you are one of those people:<p>> <i>Instead, I am going to argue that you shouldn’t pick stocks because of the existential dilemma of doing so. The* existential dilemma </i>is simple—how do you know if you are good at picking individual stocks? In most domains, the amount of time it takes to judge whether someone has skill in that domain is relatively short.*<p>> <i>For example, any competent basketball coach could tell you whether someone was skilled at shooting within the course of 10 minutes. Yes, it’s possible to get lucky and make a bunch of shots early on, but eventually they will trend toward their actual shooting percentage. The same is true in a technical field like computer programming. Within a short period of time, a good programmer would be able to tell if someone doesn’t know what they are talking about.</i><p>[…]<p>> <i>But, what about stock picking? How long would it take to determine if someone is a good stock picker?</i><p>> <i>An hour? A week? A year?</i><p>> <i>Try multiple years, and</i> even then <i>you still may not know for sure. The issue is that causality is harder to determine with stock picking than with other domains. When you shoot a basketball or write a computer program, the result comes</i> immediately <i>after the action. The ball goes in the hoop or it doesn’t. The program runs correctly or it doesn’t. But, with stock picking, you make a decision now and have to wait for it to pay off. The feedback loop can take years.</i><p>> <i>And the payoff you do eventually get has to be compared to the payoff of buying an index fund like the S&P 500. So, even if you make money on absolute terms, you can still lose money on relative terms.</i><p>* <a href="https://ofdollarsanddata.com/why-you-shouldnt-pick-individual-stocks/" rel="nofollow">https://ofdollarsanddata.com/why-you-shouldnt-pick-individua...</a>