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I had an Econ professor who insisted individual stock picking is a fool's errand, and he had some pretty compelling evidence to back it up. If you have a thousa

I had an Econ professor who insisted individual stock picking is a fool's errand, and he had some pretty compelling evidence to back it up. If you have a thousand users picking stocks randomly, some will by chance do well. I wouldn't be comfortable putting money behind the lead users who are likely victors by luck. But then again, its very possible I'm missing something.

sumedh 12y ago
> I had an Econ professor who insisted individual stock picking is a fool's errand, and he had some pretty compelling evidence to back it up. What does your Prof say about Warren Buffett.
- vidarh 12y ago
  Presumably this, from the comment you were replying to: > some will by chance do well. Buffet's performance could be due to being skilled, or the reason we're talking about Buffet instead of someone else could just be survivor bias.
  - danoprey 12y ago
    Surely not over that period of time.
  - sumedh 12y ago
    You should read this then. http://www4.gsb.columbia.edu/null?&exclusive=filemgr.download&file_id=522 http://www4.gsb.columbia.edu/null?&exclusive=filemgr.downloa...
- edfryed 12y ago
  My finance professor suggests Buffett profits by being able to borrow cheaper. Sure, there's smart picks, but if you can widen the difference between the rate you're borrowing and your returns, your average returns increase. Here lies the unfair advantage - you can't compete with Buffett unless you can borrow at the rates Buffett can. There's also the argument for diversification - investors holding large fractions of their portfolio in one security expose themselves to the operational risks of the company. By holding a broad variety of stocks, you'd expect their "lumps and bumps" to even out on average so you are only exposed to the overall market risk (i.e. hold airline stocks? Offset that with some oil stocks. And those with solar. etc.). Nvest looks cool, but also seductively simple for the casual observer. It helps pick individual stocks, not necessarily build a balanced portfolio.
  - zhoufred 12y ago
    I like your point on the balanced portfolio. I hope there will be more feature on Nvest that addresses this issue in the future.

sumedh 12y ago

> I had an Econ professor who insisted individual stock picking is a fool's errand, and he had some pretty compelling evidence to back it up. What does your Prof say about Warren Buffett.

vidarh 12y ago
Presumably this, from the comment you were replying to: > some will by chance do well. Buffet's performance could be due to being skilled, or the reason we're talking about Buffet instead of someone else could just be survivor bias.
- danoprey 12y ago
  Surely not over that period of time.
- sumedh 12y ago
  You should read this then. http://www4.gsb.columbia.edu/null?&exclusive=filemgr.download&file_id=522 http://www4.gsb.columbia.edu/null?&exclusive=filemgr.downloa...
edfryed 12y ago
My finance professor suggests Buffett profits by being able to borrow cheaper. Sure, there's smart picks, but if you can widen the difference between the rate you're borrowing and your returns, your average returns increase. Here lies the unfair advantage - you can't compete with Buffett unless you can borrow at the rates Buffett can. There's also the argument for diversification - investors holding large fractions of their portfolio in one security expose themselves to the operational risks of the company. By holding a broad variety of stocks, you'd expect their "lumps and bumps" to even out on average so you are only exposed to the overall market risk (i.e. hold airline stocks? Offset that with some oil stocks. And those with solar. etc.). Nvest looks cool, but also seductively simple for the casual observer. It helps pick individual stocks, not necessarily build a balanced portfolio.
- zhoufred 12y ago
  I like your point on the balanced portfolio. I hope there will be more feature on Nvest that addresses this issue in the future.