With our live shows done, we wanted to discuss a theme that came up over and over again in our listener Q&A and conversations afterwards. It’s a question both of us had when we started investing and it is one that can lead a lot of people to put investing in the ‘too hard’ basket. That question is – how do I pick the perfect stock? It’s a question that professional investors struggle to answer – even Warren Buffett had his IBM moment. Importantly, it is one that can get new investors lost in a sea of jargon, ratios and charts.
So in this episode we explain why new investors should forget stock picking and explain how achieving market average returns over a long time period is all you need.
In this episode you will learn:
- Why stock picking is the wrong focus for new investors
- The three things that investors should focus on instead – reducing the costs you can control, diversifying and asset allocation
- How both of us think about stock picking v market average returns
Stocks and Resources Discussed:
- The Economist – Fund managers rarely outperform the market for long
- Slater and Gordon (ASX: SGH)
- A2 Milk (ASX: A2M)
- Bellamy’s (ASX: BAL)