Why don't you just sell all your stocks and buy ETFs, you'll probably have better performance?

Why people pick stocks

On October 4th, 2019, Joaquin Phoenix’s rendition of the infamous Batman villain, Joker, premiered in a psychological thriller that bears the same name. The film harks back to an early Joker, then named Arthur Fleck. As the film progresses, Fleck’s behaviour becomes increasingly absurd. A deterioration in the protagonist's mental state sees his acts of violence become more extreme and frequent as he loses touch with reality.

In the final scene of the film, Fleck is unrecognisable as he is interviewed by a psychiatrist. Without stimulus, he begins to laugh hysterically in his iconically disturbing fashion as he smokes a cigarette in the interrogation room. When the psychiatrist asks him “What’s so funny?” he explains he was thinking about a joke. “You wanna tell it to me?”, she asks. To which the Joker replies “You wouldn’t get it”. Frank Sinatra’s That’s Life begins to play and the film ends.

The scene has since been adopted by the meme community, including myself. This particular meme is humorous because, like all good humour, there is a strong undercurrent of truth pulsing through the punchline. In my case, I question why individuals bother buying individual stocks, where the odds of beating the market are stacked against them, instead of buying the market and living a relatively carefree life. My rendition is partially self-deprecating and alludes to the little white lie we all tell ourselves as individual investors; that we are different, and despite the majority who will inevitably fail, we will beat the market.

To a layman, an investor’s dedication to beating the market over their lifetime appears absurd. The trade-off, time spent doing other things, is huge. We each have a finite amount of time on this earth. To spend countless hours which I assume add up to years of one’s life, only to underperform the market, may appear wasteful. Insanity is repeating the same thing hoping for different results. Consider the aggregate of individual investors trying to beat the market. Most will fail. Thus, on the aggregate level, these people look crazy. But there are some who manage this feat, and for them, the time was “worth it”. The Joker is batshit crazy. Most of us know that we are likely wasting our time trying to triumph over an index, yet we still do it anyway. Hence, we are all batshit crazy too. It takes a level of arrogance to beat the market, but sometimes arrogance is good. That little white lie we all tell ourselves is, in my opinion, a necessary falsity that instils belief. To do it, you must believe you can do it.

There are plenty of nuances we could unpack here but my point is this. Every good investor understands that what they are aiming for is hard to achieve, yet they do it anyway. For some, the monetary reward and alpha is all they care about. Others appreciate that the benefits of investing span far beyond an arbitrary total return quota. Everyone invests for their own reasons, so what drives people to buy stocks instead of just buying ETFs and going to the beach?

Stacked Odds

There is no denying the appeal of the stock market. It promises untold riches for everyday Joes that happens to stumble across the next Monster Beverage; which would have returned $4 million from a $1,000 investment in 1996; easier said than done. Like the lottery, which is predominantly played by the poorest in society, the stock market offers a golden ladder to escape poverty, struggle, or even just normalcy.