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Comment by marta_morena_25 | Hacker News Reader

Yeah, except that when you pick a company to invest in you are not just picking randomly. Just because most companies perform poorly, says nothing about the ability to single out high performing companies. This advise is completely flawed. Of course if you don't want to spend time on picking the right companies to invest in, an index will likely be a better and safer choice. But with an index, your gains will always be excessively capped. It's trading gains for effort spend. Not even risk. If there is a crash, indices will go down as well. By picking your companies wisely, you can run circles around any index.

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Buying wisely is difficult enough. Another challenge in picking stocks is selling wisely.

It can be difficult to hold onto the winners and not sell them too early even as they suddenly seem expensive, you’re already up 3x or whatever, and besides there’s this shiny new IPO/turnaround/whatever where you could put the money instead...

Sticking with the index saves you from these bad decisions.

(I had some Apple stock in 2002 that I sold a year later; some Tesla in 2013 that I sold in 2016; some AMD and Nvidia that I sold in 2017; and some Shopify that I sold last year.)

Buy and hold is the better strategy. Even when you think a stock may be overpriced, you incur capital gains to sell and switch somewhere else. Usually better to just hold and defer the gains indefinitely.

The Wall Street Journal has run an experiment for quite some time where staffers chose stocks randomly by throwing darts at a dart board, and compared the results of their picks to those of professional fund managers. The random picks almost always won. Here's an example: https://www.marketwatch.com/story/random-darts-beat-hedge-fu...

To do much better than the index over a long time frame would probably require a time machine.

> By picking your companies wisely, you can run circles around any index.

Proof? Warren Buffet couldn't do it. The vast majority of hedge funds, who's _job_ is to beat index funds can't do it. Of those that do, lose to index funds anyway because of fees. And these are all businesses that have several orders of magnitude advantage over an individual investor.

What do you mean "Warren Buffet couldn't do it"?

Sorry, I fumbled the phrasing of that a bit. Warren Buffet famously bet a million bucks that hedge funds couldn't beat the S&P 500 index. They couldn't, by a wide margin.

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