Are stocks a losing proposition?
By Gordon Powers, Sympatico / MSN Finance
Retired neurologist William Bernstein has pursued his hobby of statistics and portfolio theory with such passion that he first created an online publication, The Efficient Frontier, and then wrote two popular investment books The Intelligent Asset Allocator and The Four Pillars of Investing.
His latest message to investors who feel betrayed by the devastation of wealth they’ve witnessed over the 18 months: You’re right, it’s not just you, most stocks do actually lose money over time.
Citing research from the investment management firm Dimensional Fund Advisors, Bernstein notes that from 1980 to 2008 the top-performing 25% of U.S. stocks accounted for all the gains in the broad market. What’s worse, the bottom 75% collectively produced annual losses of around 2% over the past 29 years, he says.
Why not then just buy these superstocks? Because, with those odds, even your "carefully chosen" portfolio could easily wind up with none of them. Trying to trying to optimize your investment performance by seeking out these needles in the haystack is a sure way of becoming, well, poor, Bernstein maintains.
The only solution is indexing, he says. Buy the market, as cheaply as you can. Even though it's been a tough decade for the world's benchmarks, you're still better off owning a wide mix of them rather than try to pick a small number of big winners, he believes.
Echoing Bernstein’s comments is long-time Vanguard Group guru John Bogle. Backing individual stocks means placing a big bet on buying them from those who don’t know how much they’re worth and selling them to somebody who thinks they’re worth more, he recently told CNBC. That’s a supply and demand issue, he says, and has relatively little to do with the actual worth of those companies whose value lies underneath that stock price.
Posted by: SEAHAWK | Jun 12, 2021 1:00:49 PM
A person I know said recently that in 50 years he has never lost a cent in investing. He buys no stocks, mutual funds nor anything that is risk dependant. His money has, for his life been invested in savings bonds, gics and anything that is guaranteed by the CDIC. Who's stupid now? I lost 35% that I am too old to regain, with mutual funds and he still has everything he invested plus interest.
Any coments from the mutual fund salesmen??
Posted by: Trepidum | Jun 12, 2021 1:05:32 PM
Finally, an article that makes sense. I went ahead and ordered one of the books.
Posted by: Rudzy | Jun 12, 2021 1:48:33 PM
Hindsight as they say is 20/20. Most of these Gurus are super experts after the fact. Show me the Guru that "consistently" makes money and I'll show you a very rich man...and I'm not talking the Bernie Madoffs of the world as they are all crooks. All these experts tell people to buy and hold...even when the stock is tanking. All these guys are intested in is their commissions not if you are increasing your income....they make commissions whether you lose or gain in your trades. I've done better gains in the past 6 months doing my own thing then any of my wealth managers have totalled in the past 10 years! Read all you can, look at the market before it opens to see where people are bidding above yesterdays close and they are the stocks I day trade in...simple, crude some may say but I am extremely happy with the outcome...I'm making moeny!!
Posted by: philippe | Jun 12, 2021 2:11:57 PM
If you have money, you have basically 3 choices: house market, saving bonds, stock market... the housing market can go down, money can loose real value because of inflation, and stocks can go down as many found out... The problem with stock market is that the little guy nevers seems to win... the management serve themself before the litle guy... they have their salary and stock purchase options and everything... do not think that you boss a corporation because you own a share... managemement boss and feeds you peanuts. I am not buying into that economy.
My advice is that you should first own your home...
Posted by: Trepidum | Jun 12, 2021 4:23:34 PM
I fully agree with Philippe.
Priority no 1: pay off mortgage
Priority no 2: Build a retirement fund of GICs, gold, and cash in a high interest savings account. Don't squander any money and you'll be OK.
Last priority: Invest any left over disposable, can-afford-to-lose money, for fun only, in unsecured investments. Unsecured investments should NOT be part of any retirement fund, at any stage in life, period.
Posted by: Dany P. | Jun 17, 2021 9:18:02 PM
The comments above, are all basically true and undisputable. The stoak market is nothing more than a legalized pyramid, with the sharks ( brokers), swimming amongst the fish ( investors),all the while preaching to buy & hold while they skim the profits in-between.
You gotta love the next morning ( after the sell-offs ) comments from the experts on why the market dropped, on signs of volatility !!!
With the same usual results we have all come to know and experience, it's a small wonder on the future, this institution holds.
You know the old saying; " You can fool most of the people some of the time..."
The light at the end of the tunnell, is the former stock broker at his home office, working late at- night, searching for a real job, like the rest of us!!!
Question; How many fish could there possibly be left, in this investment sea ???
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