WHY STOCK PICKING DOES NOT WORK

Some people really enjoy researching and picking individual stocks.   

Trying to identify the next Amazon or the next Apple or the next Nvidia is very tempting.

If you follow the stock market, you will read about individual stocks that grow by over 50% in a year or over 100% in a year. 

In 2026, some of the big semiconductor stocks have grown by more than 100% in just six months.

Picking one of these winners feels so good – a similar feeling to winning the lottery.

Winning money triggers a massive release of dopamine in the brain's reward center.  And the brain’s reward center releases more dopamine when the outcome is uncertain.

THE ODDS

Unfortunately, the odds of picking winning stocks are very low. 

Most active fund managers fail to outperform the broad stock market index funds over time.  Less than 5% of highly paid, super smart, experienced professional investors can beat the market over ten years.  That number drops to less than 2% when we go out 20 years or more.

Do you think you can do better than the best money managers who have access to more and better resources?

THE DATA

The odds are stacked against investors because stock market returns are not evenly distributed; a small handful of "mega-winners" generate all the market's wealth, while the majority of individual stocks underperform.

Studies on long-term stock returns show that nearly 69% of individual stocks fail to keep up with the overall market, and over half actually lose money over their lifetimes.

A tiny number of massive winners pull the whole stock market higher. All of the net wealth created by US stocks over nearly a century is attributable to about 4% of them. The other 96% collectively matched the return of one-month Treasury bills.

THE TIMING CHALLENGE

Even if you were lucky enough to identify more winners than losers, you will only make money if you buy at the right price and sell at the right price. 

The entire stock market is volatile – gaining over 20% in some years and losing more than 20% in other years.

Individual stocks are much more volatile than the stock market as a whole. In any given time period, you can find stocks that drop by more than 90% and stocks that gain more than 100%.

The S&P 500 gained about 10% in the first half of 2026, yet some big names lost well over 50% (Lululemon, Fiserv, TradeDesk, Deckers Outdoors).

Thirteen of the S&P 500 stocks have gained more than 100% this year.  Sandisk gained over 500% in the first half.

Yet, if you bought some of the high flying tech stocks a month ago, those stocks have dropped by over 20% in the last 30 days.

Not only is it super difficult to identify the winners, it is very hard and takes tons of discipline and skill to buy and sell at the right time.  Knowing when to sell a winner is the key to making money with individual stocks.

BUY THE HAYSTACK

Rather than trying to find the needle in the haystack, the better strategy is to buy the haystack.

When you own broad market index funds, you own the haystack. 

The S&P 500 index consistently gains an average of 10% per year over long periods of time.  The Nasdaq-100 posts gains of 14% per year.

The average investor only gains about 5% per year, so generating gains of over 10% per year is excellent – enough to beat the professionals on Wall Street. 

GET RICH SLOW

To some people, getting rich slowly by gaining 10% per year is boring.  So, what’s the answer for these folks?

I work with many retirement investors who are drawn to stock picking.  They like to do it.  It is a hobby for them.  It is fun for them.

I also work with people who are drawn to investing in cryptocurrencies like Bitcoin.

The good news is that you can do both – get rich slow and scratch the itch to speculate.

For these people, I recommend that they take 5% of their portfolio and dedicate it to get-rich-quick schemes.  Even if they lose all of those dollars, it won’t hurt them too much.

You can ensure excellent long term returns and a healthy financial future by investing the majority of your portfolio in the best performing index funds and you can satisfy your need to speculate with a small portion of your portfolio.

Stay Disciplined My Friends,

Phil

---

Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.

Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.