Stock picking - not for me

[Sampson]

Outside forces seem to working against the companies I invest in, so a warning to others, shy away from the companies I'm holding.

I've had some sort of luck lately. While CC had linked a few things about the 'terrible' record from BP, all big-oil suffers from these events, maybe BP is marginally worse but not terribly so.

BP off-shore rig accident, Toyota gas pedal problem, what's next for my holdings? Soon they'll find contaminants in Coke cans, something bad in Pamper's, and cadmium in novelty glasses.

And here I thought it had everything to do with profitability and future earnings potential.

[CanadianCapitalist]

I've come to that conclusion a long time back. One reason is I just do not have the time anymore to read and analyze financial reports. When I look back at the time I so confidently picked stocks, I realize most of it was just luck. Some picks tanked, some soared, some were okay. My Canadian picks trailed the index badly, my US picks beat the benchmarks handily and taken together I would have done just as well just buying index funds.

That's just my experience. YMMV.

[Belguy]

Well, I am an index investor and have become equally disillusioned with the entire investing experience over the past several years.

Here are a few facts to illustrate my point (all figures as of May 31/10):

iShares LargeCap 60 ETF (XIU): 10 year return: 4.42% (no better than a ladder of GIC's over the same period and without any of the gut-wrenching volatility. The 3 year return for this ETF is negative 2.48%.

The iShares S&P 500 ETF (XSP) hasn't been around for 10 years but it's 5 year return is a dismal negative 3.06% and it's 3 year return is even worse at negative 11.73%.

The iShares International ETF (XIN) has a five year return of negative 2.81% and a terrible 3 year return of negative 14.89%.

On the bond side, the iShares CDN Broad Bond ETF (XBB) has a 5 year return of 4.50% which is hardly impressive when compared with a ladder of bonds.

On the other hand, the RBC Global Precious Metals Fund has achieved a 5 year return of 28.20%!!

Going forward, I don't see much cause for optimism out there that the equity markets will perform much better given all of the bad news and record debt levels that exist around the world. Even bonds don't look so great in a rising interest rate environment.

My conclusion, especially for those investors who are already retired or are nearing retirement, is to think long and hard about investing in the equity or bond markets and think seriously of going back to the peace and calmness of a boring investment in a ladder of GIC's.

With equities, you either need dumb luck, insider information, or a lot of time to research and keep on touch of individual equities and then know when to hold them and know when to fold them.

Not an easy task!!

[dogcom]

Belguy stocks had done very well between 1982 and 2000. In 1982 they were very cheap and in 2000 they were expensive. Dividends are not high enough and PE's are still to high so it is a good idea to wait for these to get more in line like 1982.

Gold was in the gutter from 1980-2000, since then all the money printing and debt and so on has brought gold back. I believe it will continue higher until everyone is bragging about it and the media loves it and then it will be a very bad thing to own.

[davext]

I think you need to read some trading psychology books. Remember that trading is a zero sum game, when there's a winner, there's a loser. Don't be so hard on yourself, this isn't something where you want to get all emotional about. A hell of a lot of individual investors are losing money in the market these days. If you can't handle it, then you should get out sooner or later. Part of the problem with so many losing traders is that there is no barrier to entry. You don't need a degree, and you don't need to pass any tests to start trading. You don't even need to know how to do math.

[Sampson]

One reason is I just do not have the time anymore to read and analyze financial reports.

I don't mind reading the reports, but those reports never include environmental disasters, massive recalls, or other consumer health related problems.

While my post was tongue-in-cheek (I still like to pick stocks ), I think your other statements

I realize most of it was just luck. Some picks tanked, some soared, some were okay.

is what my posts highlights. My portfolio is still going strong due to it being well diversified, however, when things have gone sour, they go really sour, even with companies as prominent with earnings, and growth as strong as BP & toyota (pre-issues), P&G, Coca-cola, McDonalds etc.

It's tough out there.

[Armi]

My portfolio is still going strong due to it being well diversified, however, when things have gone sour, they go really sour, even with companies as prominent with earnings, and growth as strong as BP & toyota (pre-issues), P&G, Coca-cola, McDonalds etc.

It's tough out there.

You got to pick companies that are cheap. Buying a dollar with a dollar 10 doesn't make sense.

[Belguy]

When picking individual stocks, what makes you think that you can outsmart all of the professionals out there with their large research departments, banks of computers and all of the other stock picking experience that they have to depend on?

You have to end up knowing something that nobody else knows and how do you do that unless you have insider information?

Come to think of it, even very few of these professionals can outperform the indexes over time.

So, my question is, why not just invest in the indexes in the first place--not that I am getting rich via that method either!!

Of course, it is true that blind luck can also enter into the picture.

[Sampson]

You got to pick companies that are cheap. Buying a dollar with a dollar 10 doesn't make sense.

A $0.90 dollar is well above historical averages. Take away the past 3 years, and heck, many of us were paying $1.30 or so for these same companies a while back.

I've never found forex rates to be linked to when equities are cheap. Its all about the earnings, future earnings, and what others are willing to pay for them.

Last March, the CAD$ was lower than it is now, much lower. Companies seemed pretty cheap back then.

[Sampson]

what makes you think that you can outsmart all of the professionals out there with their large research departments, banks of computers and all of the other stock picking experience that they have to depend on?

We don't all need to maximize returns. No need to outsmart the pros, just as long as I can reach my objectives, and I'm certainly on path to do this.

Personally, 55% of our portfolio is indexed, the rest I pick to meet our objectives, some growth, some income.

I don't need the best portfolio returns, just one that helps me get where I want to be.