Fund picks and pans stocks

lifeiswonderful says:

they invest when a stock is at it’s peck… that is a no no invest when it makes a dip, you are more likely to she it go back up opposed to buting on the peck and it go back down. do just hand you money over just to lose

morningview3 says:

People either invest in companies that go out of business or they invest in a company when it’s at it’s peak (what user said above). Interest in a company goes up when it’s shares do. Look at apple with the iPod and iPhone. Before there wasn’t too much to be interested with and now I know I’m kicking myself for not buying into it.

lithium630 says:

The biggest mistakes are

1. Buying a company when you don’ t know exactly what they do.

2. Buying on margin!

3. Holding on to a loser stock and praying it recovers instead of selling and cutting your losses.

Dougie says:

Find companies with low multiples, low debt, high return on equity, and high competitive advantage. Wait until they are out of favor and then pounce. Never overpay, even for quality.

Annie says:

They chase past returns, they try to time the market, they don’t diversify, they actively trade.

Even the vast majority of professional mutual fund managers underperform the index funds. How in the world does a kid with little or no experience expect to do better?

Warren Buffett once said that before you invest in a stock you should be able to write a book about the company.

Consider these quotes:

"Properly measured, the average actively managed dollar must underperform the average passively managed dollar, net of costs. Empirical analyses that appear to refute this principle are guilty of improper measurement."
William F. Sharpe, Nobel Laureate in Economics, 1990

"The results of this study are not good news for investors who purchase actively managed mutual funds. No investment style generates positive abnormal returns over the 1965-1998 sample period. The sample includes 4,686 funds covering 26,564 fund-years."
Davis, James L.

"The deeper one delves, the worse things look for actively managed funds."
Bernstein, William

"[Most investors would] be better off in an index fund."
Peter Lynch

"..the best way to own common stocks is through an index fund…"
Buffet, Warren

"Most of the mutual fund investments I have are index funds, approximately 75%."
Charles R. Schwab

"The road to financial perdition begins with a call to your broker who claims to be able to ‘beat the markets.’"
Daniel R. Solin

"This message (that attempting to beat the market is futile) can never be sold on Wall Street because it is in effect telling stock analysts to drop dead."
Paul Samuelson, Ph.D., Nobel Prize laureate

"Q. So investors shouldn’t delude themselves about beating the market? A. "They’re just not going to do it. It’s just not going to happen."
Daniel Kahneman, Nobel Laureate in Economics, 2002

“If there’s 10,000 people looking at the stocks and trying to pick winners, one in 10,000 is going to score, by chance alone, a great coup, and that’s all that’s going on. It’s a game, it’s a chance operation, and people think they are doing something purposeful… but they’re really not.”
Miller, Merton Nobel Laureate and Professor of Economics, Univ. of Chicago

"It’s just not true that you can’t beat the market. Every year about one-third of the fund managers do it. Of course, each year it is a different group."
Stovall, Robert , Investment Manager

"After taking risk into account, do more managers than you’d see by chance outperform with persistence? Virtually every economist who studied this question answers with a resounding "no." Mike Jensen in the Sixties and Mark Carhart in the Nineties both conducted exhaustive studies of professional investors. They each conclude that in general, a manager’s fee, and not his skill, plays the biggest role in performance."
Fama, Jr, Eugene, DFA

"99% of fund managers demonstrate no evidence of skill whatsoever."
Bernstein, William

"If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what`s going to happen to the stock market."
Benjamin Graham, Legendary investor and author

"There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor – the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know."
Bernstein, William

"By day we write about "Six Funds to Buy NOW!"… By night, we invest in sensible index funds. Unfortunately, pro-index fund stories don’t sell magazines."
Anonymous Fortune Magazine Writer

"Why does indexing outmaneuver the best minds on Wall Street? Paradoxically, it is because the best and brightest in the financial community have made the stock market very efficient. When information arises about individual stocks or the market as a whole, it gets reflected in stock prices without delay, making one stock as reasonably priced as another. Active managers who frequently shift from security to security actually detract from performance [compared to an index fund] by incurring transaction costs."
Burton G. Malkiel, author of A Random Walk Down Wall Street

"IN THE STOCK MARKET (as in much of life), the beginning of wisdom is admitting your ignorance. One of the many things you cannot know about stocks is exactly when they will up or go down. Over the long term, stocks generally rise at a nice pace. History shows they double in value every seven years or so. But in the short term, stocks are just plain wild. Over periods of days, weeks and months, no one has any idea what they will do. Still, nearly all investors think they are smart enough to divine such short-term movements. This hubris frequently gets them into trouble."
James K. Glassman, Co-Author of Dow 36,000

"All the time and effort people devote to picking the right fund, the hot hand, the great manager have, in most cases, led to no advantage." and "Most individual investors would be better off in an index mutual fund."
Peter Lynch

"Contrary to their oft articulated goal of outperforming the market averages, investment managers are not beating the market; the market is beating them."
Charles D. Ellis

What is the best investment for the average investor? Thorley agreed with Odean: index funds. [Thorley and Odean are professors who study the market)