I hope this is the very first article every reader of this blog sees.
My primary purpose is to deliver a blunt message: If you do not possess the necessary skills, I urge you to give up on the idea of investing in individual stocks. Generating long-term profits or achieving the “magic of compounding” through individual stock picking is incredibly difficult. The reality is that most people are neither suited for it nor do they possess the required capabilities.
The Foundation of My Philosophy
First, I do not believe in most popular investment methods—technical analysis, momentum investing, contrarianism, market timing, and many others. Because I don’t believe in these methods, I don’t spend time studying them, and therefore, I refrain from commenting on them.
What I believe in—what has become my “investment philosophy”—is the concept of Long-term Investment 1 and Compounding Machines. In the world of investing, the simplest, most effective, and most likely way to avoid losses and achieve long-term gains is to hold “good assets” for a very long time.
But what assets should you hold? Generally, equity investing is split into two main categories:
Individual Stocks and Market Indices 2 (Passive Indexing).
The Odds Are Against You
The goal of this “warning” is to suggest that it is highly likely that you are fundamentally not suited for individual stock picking. Investing in specific companies requires rigorous training, professional financial knowledge, deep critical thinking, and a “stable temperament.” Even if you have those, consider this: if professional fund managers (who theoretically have all the expertise) fail to beat the market index 92% of the time3, what do you think your chances are of outperforming the market by picking stocks yourself?
The “Fun” Trap
I understand the thrill of individual stocks. There’s an excitement in buying a stock today and checking tomorrow to see if it went up. It feels more engaging than a lottery ticket; while a lottery is a one-time “win or lose” event, a stock allows you to “check your prize” every single day.
Unfortunately, this “fun” rarely translates into long-term profit. By the time a single bad stock pick wipes out your capital, you realize that you have become the “the retail sucker” described in financial news.
However, if you are willing to be patient and consistently invest in low-cost Index ETFs (tracking the broader market), the tide turns in your favor. You immediately stop being “the retail sucker” and transform into an “investment master” capable of generating consistent passive income.
My plea to you is this: Let go of the idea that investing should be “fun.” You are here to make money, not to play a game.
What Does it Actually Take to Pick Stocks?
Very few people are qualified to invest in individual stocks. To do so, you must have the ability to analyze and evaluate a company. What does that look like in practice? You must be able to do the following:
Deep Research: If you find a company that has been listed for 20 years, you must read and understand the last 20 years of its annual reports.
Comparative Study: You must identify the competitors in that industry (say, eight of them) and analyze their annual reports as well to perform a comparative study.
Extreme Patience: You observe this company for 2 to 3 years, waiting until the market price falls below your calculated “intrinsic value” with a sufficient margin of safety.
Diligent Tracking: After buying, you continue to read every 10-K (annual report) and 10-Q (quarterly report) to ensure the company’s actual performance (not its stock price) aligns with your original thesis 4.
Constant Learning: This doesn’t even include the extra time spent reading industry journals and business periodicals.
And then? You do it all over again… for the rest of your life.
Learning individual stock investing is a long and extremely tedious process. Unless you are driven by genuine interest, it is boring. It is not as simple as some “internet gurus” claim—you can’t just plug numbers into Excel, press a few buttons, and expect to make a profit. That is a lie.
Final Advice
While this blog is written for those interested in studying individual stocks, I know that very few people meet these criteria.
I urge you: Unless you are willing to learn the correct way to analyze a company, give up on individual stocks. This is the purpose of this warning. In truth, the returns from a low-cost index fund/ETF are more than enough to make you satisfied, and they will likely outperform a vast majority of professional fund managers.
I am aware that “warnings” are usually written to be ignored. If people listened to warnings, there would be much less disaster in the world.
If this hasn’t discouraged you, feel free to read my other articles—but never forget that I warned you!
(The End)
Footnote 註釋：
- Long-term: Defined as holding the same security for 10–15 years or more.[↩]
- Market Index: Specifically refers to the “passive investment method” using low-cost index funds that track the total market.[↩]
- SPIVA (S&P Index Versus Active) documented that just 8.2% of large-cap domestic mutual funds outperformed the S&P 500 over the past 20 years. The odds are better over shorter time horizons, but ultimately the index seems to have a clear advantage. [↩]
- The Buffett Method: This is how Warren Buffett described his process at the 1996 shareholder meeting. While Buffett might read a report in 45–60 minutes, a beginner might take two weeks to fully digest one. Including competitors, it could take six months to truly understand one industry. Consequently, one might only be able to deeply evaluate 2–3 companies per year.[↩]
