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If you want to beat the index, wouldn't you put most of the investment into the index and then use a minority of that investment to lean into 3 or 4 top-perform

by LMKIIW 2mo ago

If you want to beat the index, wouldn't you put most of the investment into the index and then use a minority of that investment to lean into 3 or 4 top-performers from said index by buying individual shares? E.g. 80% into the index fund, 20% into individual stocks in the index fund (among the top 10 or ones you think will be hard to dethrone). Maybe this is naive?

caiocmpaes 2mo ago
Theoretically that makes sense. And I see a lot of people following the mixed approach, investing in index funds, ETFs, etc to "balance" their portfolios while keeping other riskier stocks... However, this way you'll ended up more exposed to the index than your own choices and decisions. Right? If you had put 80% in the index in 2006 and only 4 stocks (20% of your portfolio) in 'expected good fundamental stocks', yet the majority if your whole portfolio returns would be the 80% of the invested (103% return in 10 years). So, a conservative strategy definitely could mix a LOT of index/ETF, but I believe this would also drag the returns to be conservative. The exposition to individual stocks (if we could ever be able to have a investing strategy) will produce returns based in the risk you're buying.