Denton County Living Well Magazine November/December 2016 | Page 32

The Intelligent Investor

“Learn every day, but especially from the experiences of others. It’s cheaper!” — John C. Bogle

What Experts Say about Individual Stocks vs. Mutual Funds
Kiplinger Personal Finance “Eight Stocks to Buy Now” in the January, 2015 forecast issue under-performed its “Five
Stocks to Sell” twelve months later.
Barber and Odean Study: “Of 66,465 households with accounts at a large discount broker during 1991 to 1996,
those that trade most earned an annual return of 11.4 percent, while the market returned 17.9 percent.”
Brett Arends, Wall Street Journal columnist: “Buy individual stocks only as a gamble.”
Benjamin Graham: “I have little confidence, even in the ability of analysts, let alone untrained investors, to select
common stocks what will give better than average results.”
Bill Bernstein, author of The Four Pillars of Investing: “Picking individual stocks is like volleying with the Williams
sisters.”
Jack Bogle: “Attempting to build an investment program around a handful of individual securities is, for all but the
most exceptional investors, a fool’s errand.”
Adam Bold, author, adviser: “Mutual funds don’t have the pizzazz of the hot stocks of the moment. If you’re looking
for entertainment, go gambling in Las Vegas. But if you want to accumulate real money for your retirement and other
goals, mutual funds are the safer bet.”
James Dahle, MD, financial advisor, and author of The White-Coat Investor: “Think you know how to pick stocks?
Then guess again. Every time you buy or sell the person on the other side of the trade likely has an IQ of 160,
spends 70 hours per week analyzing his industry, and has access to computing power and databases you can only
dream of.”
Dalbar Research Report (July 15, 2003): “The average equity investor earned a paltry 2.57% annually; compared to
inflation of 3.14% and the 12.22% the S & P 500 index earned annually for the last 19 years.”
Charles Ellis author of Winning the Loser’s Game: “If you, like Walter Mitty, still fantasize that you can and will beat
the pros, you’ll need both luck and prayer.”
Michael Lewis, former bond broker and financial journalist: “A vast industry of stockbrokers, financial planners, and
investment advisers skims a fortune for themselves off the top in exchange for passing their clients’ money on to
people who, as a whole, cannot possibly outperform the market.”
Kenneth French: Former President of the American Finance Association: “The market is smarter than we are and no
matter how smart we get, the market will always be smarter than we are.”
Sy Harding, Forbes contributor: “My advice – avoid individual stocks! Even experienced full-time professional money
managers, with staffs of trained people performing research, with access to data, software, and corporate contacts
that most part-time investors could not come close to duplicating, struggle to match the market’s performance by
buying, holding, or selling individual stocks.”
Danial Kahneman, Nobel Laureate: “There is general agreement among researchers that nearly all stock pickers,
whether they know it or not-and few of them do-are playing a game of chance.”
Mathwizard: The vast majority of trades you would make are between you and a professional investor. Both of you
are assigning a value to the stock, and one of you thinks the price is high and another thinks it is low. Who do you
suppose is more likely to be right.