Just keep dollar cost averaging in, especially when things look the bleakest! ETF's are fantastic for the core part of your portfolio. Having single name positions for a small portion of portfolios also works well.
How many times have any of us read any article about any topic and its admixture is immediately clear; either...
01. The journalist is a terrible writer and does not know his or her topic;
02. The journalist is a terrible writer but knows his or her topic exceedingly well;
03. The journalist is an excellent writer but does not know his or her topic; or
04. The journalist is an excellent writer who also knows his or her topic exceedingly well.
You can count on the fingers of one hand the cohort that falls into group 4. The record is especially abysmal when the topic is specialized, often with its own jargon, such as finance.
You, Conor, begin to carve out a niche for yourself in group #4. I know not your professional aspirations - heck, I do not even know you! - but if your ambition includes a plenitude of time to do deep research and then write long-form narrative-style journalism, you have the the makings of a fine career ahead of you.
This is super kind David, and was a touching comment that made my weekend. Thanks for taking the time to share it with me because it's deeply appreciated.
I invest in individual stocks because they have made me wealthy beyond my dreams. I probably spend twenty to sixty hours a week on researching and trading, but it's been worth it because my wife and I were able to retire early. I now have an eight-year CAGR of 43% and have turned $750K into $7M. The key is not to look for one stock to buy and hold forever but to buy stocks that are going to appreciate in the next few months to one year. Most of these are extremely boring, safe companies, the kind that Peter Lynch would like. Good recent examples have been Limbach Holdings, Hammond Power Solutions, and Profire Energy.
I love the Stock Market, I'm a long term investor and it has taught me how to control my emotions, over the last couple of yrs I have had multiple Pf drawdowns of +30-40%, and Stocks of +75% and yes it's disappointing, and it should be it's a lot of money, but it's part of an Investors long term journey.
We've all heard of I'll never sell, then markets drop, and it's the first thing new investors do, they are surrounded by fake forecasting, negative media, so much noise, that they can't even think clearly, let alone plane a strategy, for them it's overwhelming, understandably, so they Sell and unfortunately lose a lot of money along the way.
Because I knew this from first hand experience from yrs earlier, I knew I had too learn much more.
What has helped me to teach myself discipline is Reading about the History and actions of the Markets over time, from Super Investors, Reports, White Papers etc and there's a lot to read. I also invested in a huge personal Library that helps me refer to things I need to learn and understand and I use it a lot, daily in fact.
And if some of you are like me, reading is a form of forced medicine, as I don't have long attention span so I have to have several books I'm reading, that has been another learning area I have had to really work on.
I can share with you that this area has allowed me to grow more as a person, (even at my age) become less impulsive, make better decisions, I never stress out on Ratios, they don't interest me as much as the business itself, (i know what yr thinking) my background is Building and running businesses so that is where I concentrate my analysis on.
The business's product must solve a problem and be used daily, by users repeatedly, I have a small network of information sources I use to do the leg work, research because they are much better at that than I am, plus they love it, and I look for a set of business markers, if the bus passes those I am on to numbers and then decision time.
For me one of the most important areas I look at is Client Numbers, Subscription # & growth, Work On Hand, and Future Order Book, they must have growth in work tomorrow to pay tomorrows bills, if not I don't buy them. Management integrity has to be bullet proof.
I only do Stocks, my favorite areas are Tech, Software, AI, Services, Automation, Robotics, Hardware, and so far they have been good to me, I am 100% hopeless at Health Stocks, I just can not get them right, no matter how much reading I do, and it's tough going, so I only have a couple.
I am happy with that level of risk, and Yes it gets bumpy at times but that's the exciting game we play. I can never outsmart Lady Luck so I don't try, it's a losers game.
In summary, my journey is still young, but the knowledge has definitely made me a much more relaxed, smarter, more stable, overall Investor who enjoys the game a lot more now, than I had ever years earlier, I am more Profitable by orders of magnitude and I still own the exact same stocks I first bought when I started, yrs ago.
Yes they are actually worth more today than then... but tomorrow could be the total opposite,
and so our journey continues friends...
Thanks again CM thoroughly enjoyed the chat, always good to see you.
Oct 10, 2023·edited Oct 10, 2023Liked by Conor Mac
This one deserved some commentary. “ETFs and other index proxies do not facilitate the price-discovery process (as specific stocks become more expensive, index-like investments buy more).”
First that one would pick stocks to facilitate others’ price discovery process is a strange motivation. It is like asking to be dumb money.
Second, assuming for a moment S&P 500-like market value weightings, then ETFs don’t buy more. They own 10% of the market, specific stocks to up, they still own 10% of the market.
But more importantly, how are these two points even related? It’s such a bizarre justification for picking stocks. I wonder about the person who submitted it.
This is a great article on a timeless topic. I appreciate you writing it. Your observations are spot on. One of the great advantages of index funds, especially market-weighted funds, is how they operate like a flywheel. Good returns drive new inflows to the funds which then contribute to increasing the index’s returns which in turn drive the flywheel forward. During a nearly 40 year decline in interest rates, this process seems nearly axiomatic. My hunch is that interest rates are more likely to remain elevated than to return to near zero. If so, it’s possible, we may learn that the flywheel can reverse, or at least cease to push prices higher, in which case, purchasing individual stocks, may no longer seem so arrogant or futile.
Thanks Doug, and I think I am in agreement with your thoughts there. We are all victims of survivorship bias, and I think there will always be a strong case for both buying indexes and being a stock picker. Just depends on the individual’s circumstances.
I think i’ll always fool myself into thinking like a stock picker haha.
It's not impossible to do well but you need discipline to go your own way. If you lack that discipline, it's best to dollar cost average into low-cost well-diversified Vanguard ETFs.
Hi Conor, I hope you're doing well. Massive fan of your Substack/Twitter.
I am a founder of Zeed (https://zeed.ai/). We're helping creators transform their written content (like this Substack) into dynamic video pieces using AI to capture new audiences.
Would love to show you an example and jump on a call if you're interested in hearing more! Best, Rohan.
Appreciate the shoutout! This is a great post that you put together...gives your readers a lot to think about when it comes to active vs. passive and if you really have an edge in the market.
Just keep dollar cost averaging in, especially when things look the bleakest! ETF's are fantastic for the core part of your portfolio. Having single name positions for a small portion of portfolios also works well.
Well said
How many times have any of us read any article about any topic and its admixture is immediately clear; either...
01. The journalist is a terrible writer and does not know his or her topic;
02. The journalist is a terrible writer but knows his or her topic exceedingly well;
03. The journalist is an excellent writer but does not know his or her topic; or
04. The journalist is an excellent writer who also knows his or her topic exceedingly well.
You can count on the fingers of one hand the cohort that falls into group 4. The record is especially abysmal when the topic is specialized, often with its own jargon, such as finance.
You, Conor, begin to carve out a niche for yourself in group #4. I know not your professional aspirations - heck, I do not even know you! - but if your ambition includes a plenitude of time to do deep research and then write long-form narrative-style journalism, you have the the makings of a fine career ahead of you.
Godspeed.
David
This is super kind David, and was a touching comment that made my weekend. Thanks for taking the time to share it with me because it's deeply appreciated.
Conor
I invest in individual stocks because they have made me wealthy beyond my dreams. I probably spend twenty to sixty hours a week on researching and trading, but it's been worth it because my wife and I were able to retire early. I now have an eight-year CAGR of 43% and have turned $750K into $7M. The key is not to look for one stock to buy and hold forever but to buy stocks that are going to appreciate in the next few months to one year. Most of these are extremely boring, safe companies, the kind that Peter Lynch would like. Good recent examples have been Limbach Holdings, Hammond Power Solutions, and Profire Energy.
That’s great, thanks for sharing Yuval.
Excellent article CM, thank you.
I love the Stock Market, I'm a long term investor and it has taught me how to control my emotions, over the last couple of yrs I have had multiple Pf drawdowns of +30-40%, and Stocks of +75% and yes it's disappointing, and it should be it's a lot of money, but it's part of an Investors long term journey.
We've all heard of I'll never sell, then markets drop, and it's the first thing new investors do, they are surrounded by fake forecasting, negative media, so much noise, that they can't even think clearly, let alone plane a strategy, for them it's overwhelming, understandably, so they Sell and unfortunately lose a lot of money along the way.
Because I knew this from first hand experience from yrs earlier, I knew I had too learn much more.
What has helped me to teach myself discipline is Reading about the History and actions of the Markets over time, from Super Investors, Reports, White Papers etc and there's a lot to read. I also invested in a huge personal Library that helps me refer to things I need to learn and understand and I use it a lot, daily in fact.
And if some of you are like me, reading is a form of forced medicine, as I don't have long attention span so I have to have several books I'm reading, that has been another learning area I have had to really work on.
I can share with you that this area has allowed me to grow more as a person, (even at my age) become less impulsive, make better decisions, I never stress out on Ratios, they don't interest me as much as the business itself, (i know what yr thinking) my background is Building and running businesses so that is where I concentrate my analysis on.
The business's product must solve a problem and be used daily, by users repeatedly, I have a small network of information sources I use to do the leg work, research because they are much better at that than I am, plus they love it, and I look for a set of business markers, if the bus passes those I am on to numbers and then decision time.
For me one of the most important areas I look at is Client Numbers, Subscription # & growth, Work On Hand, and Future Order Book, they must have growth in work tomorrow to pay tomorrows bills, if not I don't buy them. Management integrity has to be bullet proof.
I only do Stocks, my favorite areas are Tech, Software, AI, Services, Automation, Robotics, Hardware, and so far they have been good to me, I am 100% hopeless at Health Stocks, I just can not get them right, no matter how much reading I do, and it's tough going, so I only have a couple.
I am happy with that level of risk, and Yes it gets bumpy at times but that's the exciting game we play. I can never outsmart Lady Luck so I don't try, it's a losers game.
In summary, my journey is still young, but the knowledge has definitely made me a much more relaxed, smarter, more stable, overall Investor who enjoys the game a lot more now, than I had ever years earlier, I am more Profitable by orders of magnitude and I still own the exact same stocks I first bought when I started, yrs ago.
Yes they are actually worth more today than then... but tomorrow could be the total opposite,
and so our journey continues friends...
Thanks again CM thoroughly enjoyed the chat, always good to see you.
Kiwi ;)
What a beautiful comment Kiwi, thanks for sharing it with everyone 🤝🏼
This one deserved some commentary. “ETFs and other index proxies do not facilitate the price-discovery process (as specific stocks become more expensive, index-like investments buy more).”
First that one would pick stocks to facilitate others’ price discovery process is a strange motivation. It is like asking to be dumb money.
Second, assuming for a moment S&P 500-like market value weightings, then ETFs don’t buy more. They own 10% of the market, specific stocks to up, they still own 10% of the market.
But more importantly, how are these two points even related? It’s such a bizarre justification for picking stocks. I wonder about the person who submitted it.
This is a great article on a timeless topic. I appreciate you writing it. Your observations are spot on. One of the great advantages of index funds, especially market-weighted funds, is how they operate like a flywheel. Good returns drive new inflows to the funds which then contribute to increasing the index’s returns which in turn drive the flywheel forward. During a nearly 40 year decline in interest rates, this process seems nearly axiomatic. My hunch is that interest rates are more likely to remain elevated than to return to near zero. If so, it’s possible, we may learn that the flywheel can reverse, or at least cease to push prices higher, in which case, purchasing individual stocks, may no longer seem so arrogant or futile.
Thanks Doug, and I think I am in agreement with your thoughts there. We are all victims of survivorship bias, and I think there will always be a strong case for both buying indexes and being a stock picker. Just depends on the individual’s circumstances.
I think i’ll always fool myself into thinking like a stock picker haha.
Well for every 512 coin tossing monkeys, two of us are going to flip heads eight times in a row!
😂 good point.
It's not impossible to do well but you need discipline to go your own way. If you lack that discipline, it's best to dollar cost average into low-cost well-diversified Vanguard ETFs.
Good point Michael, thanks
Great read! I’m about 65% in ETFs the rest in individual stocks. Not because I think I’ll outperform. The intellectual pursuit is what does it for me.
Thank you! Can understand that fully, and glad you enjoyed the read.
I think you meant losing, not loosing.
Good spot, fixed. Thanks John
Hi Conor, I hope you're doing well. Massive fan of your Substack/Twitter.
I am a founder of Zeed (https://zeed.ai/). We're helping creators transform their written content (like this Substack) into dynamic video pieces using AI to capture new audiences.
Would love to show you an example and jump on a call if you're interested in hearing more! Best, Rohan.
Hey Rohan, thanks for the kind words. You are welcome to reach out over on Twitter.
Great reflection theme for anybody and the inputs for it ... thank you!
Appreciate it Mav!
Nice piece on a matter that is close to a lot of DIY investors.
Appreciate your comment, thanks for the kind words :)
I published something today about the same thing. Enjoyed your take.
Oh nice, where did you publish it?
Thanks also.
Awesome post! 🙌
Thanks Neil!
Bonner Private Research investment letter that you must be part of the Sub-stack ..?
Oh I know them, but the acronym threw me off there for a second. I read their work, but am not part of their newsletter.
Appreciate the shoutout! This is a great post that you put together...gives your readers a lot to think about when it comes to active vs. passive and if you really have an edge in the market.
Thanks Mosaic, really enjoy the paper you shared, and it came at the right time.