Is Stock Picking A Waste of Time? (Spoiler Alert: Yes)

Posted Wednesday, May 5, 2021

A waste bin (dumpster)

I've recently made the commitment to stop trying to pick individual stocks for my portfolio.

I didn't do much of it in the first place, but every once in a while, I would get caught up in the finance news cycle and get starry-eyed and bullish on companies I typically wouldn't think about otherwise.

I've seen it said countless times, but I realized first-hand that over the long term I will not be able to outperform the market, and it's a waste of time and money to try and do so.

What's the End Game?

I recently started to realize, you almost never hear success stories about someone's perfectly managed portfolio.

You hear about people who hit big on one or two stocks, people that got paid in company stock before that company blew up in value, people that bet on crypto early, but I have never seen a story about an average person who has picked stocks so well down the stretch that they can retire early.

I'm not investing to be a get lucky and win big, I'm investing as a calculated growth opportunity.

I always come back to the fact that full-time professionals rarely outperform the S&P 500.

So why do I think I would?

I don't have a good answer for that, so going forward I'm going to try and keep things simple.

My end game is about getting the best return by doing as little work as possible.

I want to eliminate risky investments based on biased data, FOMO, strong emotions, and anything else that convinces me I'm making the investment of a lifetime.

My Time is Valuable

Guy checking his apple watch for the time as he realizes he late because he was picking stocks

I don't think beating the market is impossible, just very improbable.

If I want to be successful I need to be very calculated about my investments.

That means studying graphs, reading news articles, and watching videos to get educated and constantly stay educated.

And after all of that, there's still a great chance my hand-picked portfolio will underperform the S&P 500 over the span of a couple of decades.

Stock picking is a waste of my time.

That time would be much better invested in furthering my education for my full-time profession or creating new streams of income.

Risk vs Reward

![Cliff jumping. An activity less riskier than stock picking]](

What if 20-years from now my portfolio underperforms the S&P 500? Will it have been worth the potential upside?

No way.

This is time in the market I'll never be able to get back.

I'm okay with taking on a bit of risk, but knowing that I will have to wait years to see if this bet pays off, I'd rather take the safest path to success.

I'm fine with missing out on big stock gains, but I don't want to realize years down the road that the more profitable option turned out to be the easiest option.

The Exception

The one exception to my new stock-picking ban is when I find a company that creates an exceptional product or service I frequently use and I believe in.

I have no problem supporting companies that have proven they can consistently provide great value for their customers.

If I went back and retroactively applied this logic (Tesla, Amazon, Apple, Google) I'd be doing pretty well.

In these cases, it's not about beating the market or being some stock-picking genius. It's about taking a stake in something I want to support.

My Plan Moving Forward

A guy planning a house I guess

So now that I've explained why stock picking is a waste of time (for me) let me tell you my plan moving forward:

  • Invest primarily in ETFs each month
  • Use excess savings to invest in one of two things:

    • A company with a product/service I use and want to support
    • Crypto (BTC or ETH)

It's a simple plan that I hope will serve me well over the next few years.

I will re-evaluate this in the next year and decide what adjustments I should make going forward.

This is my strategy though, yours will likely be different based on your situation and beliefs. Do you still like to pick stocks for your portfolio? Why or why not? Shoot me an email and let me know where you stand.


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