Stock Index Versus Individual Stocks

 

We are often told stocks always go up.

And this is TRUE!

Of course there are 2 tricks to it.

1.  You need to use a long time frame. 100 years is best! (If you were wrong, its your clients' grandchildren who will be threatening to sue, but by that time, you will be long gone...) 

2.  Always use a stock index.

Of course readers who are i9 multi-core will have guessed what I'll be writing next and don't even have to bother reading further...

For readers who are single core Pentium like me, let me explain by applying History to investing.

You do know that empires come and go. Even empires so mighty and great that no one can believe will decline and fall one day...

Remember Rome? How about the Tang dynasty? Or more recent the British Empire?

If empires and countries do rise and fall, how are you so confident that the individual stocks that you own will always go up in the LONG term?

Remember Kodak and Polaroid? Or Motorola and Nokia?

There's not much money to be made by telling clients to buy an index fund or ETF. 

Hence snake oils show long term charts of stock indexes, but charge you fees and commissions to recommend what INDIVIDUAL stocks you should buy (and never sell).

See how you got "manipulated"?

This is a common Jedi mind trick used on unsuspecting bei kambings...

Now its so much easier to spin Buy-and-Hold; think Long Term; when its Lower, just buy More!

These are comforting words when staring at your portfolio in the red...

No?