Comments by "JP 72" (@739jep) on "Picking Stocks | Common Sense Investing" video.

  1. I’d say the main point is not to pick stocks and instead invest in broadly diversified low fee index funds.
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  2. He’s not saying that there are no individual companies that have had huge returns. We know who these companies are now , because we have the benefit of hindsight. We don’t know what the next Apple stock will be. He’s saying it’s extremely difficult to know ahead of time which will be the performers. Trying to pick them is demonstrably a losing battle and akin to trying to pick the winning lottery numbers. And buffet says that most people shouldn’t be picking individual stocks. The problem is everyone thinks they’re not ‘most people’ . In recent history Buffet likely would have been better off investing in a broadly diversified index fund himself.
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  3. What you’re describing has been analysed extensively and, for the most part, has reached a very different conclusion. I think one of the best papers addressing this is the paper written by fama and French called ‘luck versus skill in the cross section of mutual fund returns’ . You could easily find many papers that demonstrate something similar however. Ultimately it all comes back to how efficiently markets priced assets. If prices reflect the information that a skilled investor could learn by analysing the company (as you’re describing), then their skill would not be reflected in superior risk weighted returns.
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  4. Do you often call people biased who present peer reviewed evidence and quality data that supports their view? If you disagree with him, point out where the researchers got it wrong instead.
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