Should I Just Buy The S&P500

Summary

In this video, the speaker tackles the debate of whether to invest in individual stocks or ETFs, specifically the S&P 500. They reflect on their personal approach, emphasizing that there’s no right number of stocks as long as the portfolio is manageable and performs well. Citing Peter Lynch's success with a large stock portfolio, the speaker suggests 15-35 stocks as a balanced range for most investors. They also explain that if stock picking isn't yielding market-beating returns, switching to ETFs might be a better choice. Ultimately, performance is key, and the right strategy depends on the investor's goals and risk tolerance.

Takeaways

• 😀 Individual stock picking or ETFs? The key is outperforming the market, regardless of how many stocks you hold.
• 😀 📈 Peter Lynch’s strategy proves that owning a large number of stocks (even over 1,000) can still lead to market-beating returns.
• 😀 💡 The number of stocks you hold matters less than your ability to beat the market with them.
• 😀 📊 A portfolio of 15-35 stocks is a good range for diversification while still being manageable.
• 😀 🛠️ You should only own as many stocks as you can effectively track and research.
• 😀 🔥 Smaller portfolios should have fewer stocks to ensure each position is meaningful and worth the effort.
• 😀 💸 Larger portfolios can afford more stocks to spread risk, but they must still be actively managed.
• 😀 ⚖️ Risk management is key—avoid having too much of your portfolio invested in a single stock to prevent catastrophic losses.
• 😀 📉 If stock picking isn’t beating the market, consider switching to passive investments like ETFs (e.g., S&P 500).
• 😀 🧘‍♂️ If individual stock picking is causing stress or doesn’t outperform, ETFs can provide a simpler, more predictable return.
• 😀 🎯 The goal is to make money and outperform the market. If you’re achieving that, don’t worry about the exact number of stocks you own.

Q & A

Why did the speaker decide to make this video about ETFs and stock picking?

The speaker was inspired by a comment from a viewer asking why they don't just invest in an ETF like the S&P 500 instead of picking individual stocks. The comment sparked the idea for this video.

What is the general opinion of the speaker on owning many stocks in a portfolio?

The speaker believes there is no right or wrong number of stocks to own, as long as an investor is outperforming the market. The key is to have enough stocks to be diversified, but not so many that it becomes difficult to keep track of them.

What example does the speaker use to illustrate that having many stocks in a portfolio can work?

The speaker refers to Peter Lynch, who held over 1,000 stocks in his portfolio and achieved an average annual return of 29.2%, showing that it is possible to have a large number of stocks and still beat the market.

How does the speaker suggest investors should balance the number of stocks they own?

The speaker suggests owning between 15 to 35 stocks, as this number allows for diversification while still being manageable enough to track each company’s performance and stay informed about earnings and news.

Why does the speaker recommend a smaller number of stocks for investors with less capital?

For smaller portfolios, having too many stocks dilutes the impact of any individual stock's performance, making it less worthwhile to put in the time and effort needed for research. The speaker suggests taking a higher risk with fewer stocks in such cases.

What are the risks of having too many stocks, according to the speaker?

The speaker cautions that having too many stocks can lead to missing important earnings reports and news updates, which could result in poor investment decisions. It’s important to be able to keep track of the companies in your portfolio.

What does the speaker think about investors who own only a few stocks in their portfolio?

The speaker acknowledges that some investors might prefer owning just a few stocks if they believe they have a strong hit rate. However, the speaker values diversification and the peace of mind that comes from spreading risk across more stocks.

Under what circumstances would the speaker consider switching to ETFs like the S&P 500?

The speaker would consider switching to ETFs if they were no longer able to beat the market through individual stock picking. If their returns started to underperform, they would then look into ETFs like the S&P 500 as a more stable option.

How does the speaker's current strategy compare to the performance of the S&P 500?

The speaker reports that their individual stock picking strategy has outperformed the S&P 500 most years, with only one year of underperformance. They expect to outperform the S&P 500 by another 10% in the current year.

What is the long-term financial benefit of outperforming the S&P 500, according to the speaker?

The speaker illustrates that by beating the S&P 500 by 5% or 10% each year, an investor can significantly increase their portfolio’s value over time, potentially adding tens of thousands of dollars in returns over a 10-year period.