You Can Outperform The Market, Here's How
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- เผยแพร่เมื่อ 22 ส.ค. 2024
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I am not a professional investor and have never claimed to be. I'm an amateur investor sharing my experience of what I've learned, where I have had success, and where I've had failures. I share my thoughts on investing and performance with transparency. My approach and goal to investing is to buy high-quality long-term investments in world-class businesses that I call "compounders". I view my investments as businesses, not as stocks. Before creating content on TH-cam full time I worked as a senior-level programmer for 8 years. Over the years as a programmer, I compounded my knowledge of development. I take the same iterative learning approach to my study of investing. I study investing as a craft in the continual pursuit of being better. I will make mistakes in investment decisions from time to time. Results are not guaranteed. Please do not blindly follow me into any investments, and make sure your portfolio and investments are built around your specific income, risk tolerance, personality, timeline, and overall circumstances.
“The big money is not in the buying and selling, but in the waiting" - Rest in peace Charlie Munger
He was great. He has said you only need 3-4 companies to be rich and you really only need one! To Joes point the employees at the companies mentioned have crushed if they get company stock.
@@LeonardoGrigio
Bad luck if you got SVB stock and didn't sell at its peak when the C suite did.
No Advertising, No selling, No Bullshit, Straight to point. Really appreciate for your content! Keep it up 👍
He advertises the hell out of Qualtrim to be honest, but I don't blame him since it's his own creation.
@@InfoRankerand he does not overcharge, in fact 1st month trial free
@@InfoRanker You are right buddy, he actually does but he is way better then all other youtuber who will provide you shity content.
Qualtrim is awesome. 10 bucks per month and better UI than most stock analysis tools
@@Rhino11111111 Exactly, that’s what i am saying, you can see what he has done so he is the most transparent youtuber ever.
I watch content and learn out of it and i never ever buy any course or anything from youtubers but i would say he got better financial content than any other youtuber.
Hey! Statistician here. Good video. I just wanted to point out one thing at around 10:30 - to get the odds of picking the right stocks each year for say 2021, 2022 and 2023, you have to be in the right each year. To find these odds, do 25% x 57% x 48%. The odds of you picking the winning stocks for 3 years in a row is 6.84%. Just thought I'd throw that in as part of the debate.
good point. also, each year the outperformers are rotating, meaning there much fewer % of stocks outperform 3 years or 5 years in the row.
Yup....but in any given year, the probability of you picking a winner is far greater than..."it can't be done". In any given year, it can be done....by shear luck or blindfolded. You add a little bit of fundamental research to your picks and all of a sudden you look like a genius.
The odds to picking a stock *AT RANDOM* 3 years in a row is 6.84%.
This is why index's rebalance semi-annually and investors in individual stocks should re-visit their investments each year to look at the fundamentals and make sure they're moving in a positive direction, or replace them with companies that are.
@@JosephCarlsonAfterHours I think picture you paint in the video of outperforming the market is basically "1 in 4" or better is misleading. The true number is far less than that if you're trying to beat the market over 5 years due to the statistics I just mentioned.
Beating the market in any given year isn't that hard. Beating the market over many years is exponentially difficult.
@Michael-DS Right. If we buy and sell at the beginning and end of each year, I'm sure the average investor could beat or match the market. But if the objective is buy and hold, then the odds of picking a winning stock 20 years from now is absurdly low. If you would have told me in 2003 to buy Amazon and Nvidia, I would have said whats Amazon and Nvidia? The idea that 20 years from now Apple, Walmart, and Starbucks will continue to lead is just improbable. It will likely be a company none of us have even heard of.
According to the IRS, about 95% of all those who manage their own money, lose money doing so.
Fidelity did a study many years ago during the days of Peter Lynch. Lynch was achieving the astounding rate of return of nearly 22% per annum. What Fidelity found out though was that the vast majority of people buying Lynch’s mutual fund were actually losing money by buying and selling the fund in an effort to “time the market.”
The answer then, to the question, is that perhaps 5% of “ordinary investors” actually make money, and fewer than that even beat the benchmark S&P-500.
in his 2016 letter to shareholders,
Buffett explains that while there are of course
some skilled individuals who are highly likely to outperform the S&P over long stretches.
he's identified early on only 10 or so professionals
that he expected would accomplish this feat.
Buffett does acknowledge that there may be hundreds perhaps thousands
of people out there who can accomplish this feat,
but even still we're talking about a tiny portion of the population early on is an important qualifier
in Buffett's sentence.
The market trend can turn around very quickly. In fact, the indexes often switch from a bear market to a bull market when the news is at its worst and the mood of investors is at its lowest point. I read an article of people that grossed profits up to $150k during this crash, what are the best stocks to buy now or put on a watchlist?
Investors should be especially cautious about their exposure and new acquisitions in the face of inflation. Obtaining such high profits during a recession is only possible with the assistance of a reputable advisor or competent specialist.
True, initially I wasn't quite impressed with my gains, opposed to my previous performances, I was doing so badly, figured I needed to diverssify into better assets, I touched base with a portfolio-advisor and that same year, I pulled a net gain of 550k...that's like 7times more than I average on my own.
@@PhilipDunk This aligns perfectly with my desire to organize my finances prior to retirement. Could you provide me with access to your advisor?
There are a lot of independent advisors you might look into. But i work with “Vivian Carol Gioia” and I have been working together for nearly four years, and she is excellent. You could proceed with her if she satisfies your discretion. I endorse her.
@@PhilipDunk Thanks, I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a call.
There are 3 problems in picking your own stocks:
1) Time to study, get good, pressure, doubt, fear, uncertainty in your picks
2) Risk involved
3) Taxes, you don't pay taxes until you sell, for an ETF there's no need to sell, but if you pick stocks yourself you have to sell when they're overvalued to buy undervalued stocks, creating a taxable movement in between.
So if I have to pick between 10% without any time or worries, and with low risk, and 20% with way more risk, uncertainty, stress, pressure, I will always choose the ETF.
With your analogy of the needles, only 60 needles returned twice as much as the SP500, 60 out of 500, so 440 were not worth the risk of picking individual stocks. I'm not sure if it's worth the risk. In my opinion, if you're not outperforming the market by a good margin is basically not worth it.
I’ve been using his strategy since the 90’s and couldn’t agree more with him. Pick excellent stocks and own them for a long time.
I’ve outperformed. Maybe there are years I haven’t, but over the past 30 years I’ve done much better than the funds or ETF’s I’ve owned.
While this provide an actual explanation on how you buy your stocks. After buying stocks for just over 10 years, i'm still struggling to make gains. How do i adjust or revamp my $2M portfolio? should i consider some defensive investments?
In this current unstable markets, It is advisable to diversify while retaining 70-80% in secure investments. looking at the worth of your portfolio, you should consider financial advisory.
Agreed, my portfolio is well-matched for every market season yielding 85% from early last year to date. I and my advisr are working on a 7 figure ballpark goal, tho this could take another year. IMO, financial advisors are the most sought-after professionals after doctors.
great gains there! mind sharing details of your advisor pleas? i've started gaining more cash flow with my employment and looking at putting money into stocks and alternative assets that can help build wealth over time
She goes by ‘’Amber Kay Wright’.... I suggest you look her up. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.
Thank you for sharing, I must say, Nicole appears to be quite knowledgeable. After coming across her web page, I went through her resume and it was quite impressive. I reached out and scheduled a call
Overall, 51% of traders think next year would favor stocks, mutual funds, and other equity-based investments, despite Treasury yields and other safer cash-like investments paying big. I’m looking for opportunities in the market that could fetch me $120,000 ahead of retirement in 2024.
That's up noticeably from 41% in the fourth quarter again, despite shaky-looking markets, I'll suggest you speak with a market expert before investing; My two cents
You are correct; with the help of an investing advisor, I was able to diversify my $550K portfolio and make over $250K in net profit from high-yielding bonds, ETFs, and stocks.
Please who is the consultant that assist you and if you don't mind, how do I get in touch with them? My wife and I have been looking for similar opportunities.
Everyone at my place of work including myself works with the popular lady *KAITLIN ROSE STERNBERG* . She's been able to gain some reputation with over a decade of experience, so it shouldn't be a hassle to find basic information on the web.
The earnings yield of the S&P 500 is greater than the yield for long-term TIPS.
It makes sense that roughly 50% of the companies would outperform the average in a single year. BUT, I would be curious to see how much the percentage of outperformance is affected by increasing the duration from 1 year to 5 or 10 years. Great video; thanks, Joseph.
This is why I do a bit of both. S&P 500 in my roth account since I already doubled the return through employer match. Some in SCHD and individual picks in a normal account for fun
Would just add that 50% of the VALUE of the S&P500 outperforms not 50% of the STOCKS in the S&P500 since it is mkt cap weighted. Given the mkt cap weight it is easier for the 500th member of index to outperform the index than MSFT. So what he is saying is kinda right but there is some nuance that investors should probably be aware of.
Interesting video, but cutting corners by looking the past performance of the index. If long term investing would be that easy one would expect Joseph's own portfolio beat the index, which it doesn't seem to do.
Most of the value comes from a minority of stocks. Most stocks trail
100%. A long-term holding on average is likely to track the market. A stock with a 50% performance this year might have a -50% performance next year. He hit the nail on the head mentioning fundamentals though!
Every week I buy more of whatever is the lowest percentage of my portfolio and try to keep everything around 10%, but what could be my safest buys with $400k to outperform the market in 2024?
I would avoid the index funds, mutual funds, or specific stocks for the time being. 5% fixed incomes are the safest bet for now. Save your cash for when the market actually shows signs of recovery
You have to be deliberate in making good profits in this mkts. When confronted with a similar dilemma, we consulted with a fiduciary who assisted us in constructing a robust portfolio. It has endured the test of time and grown to a high seven-figure sum. The dividends from our portfolio cover our expenses and we don't have to worry about inflation/recession corroding our gains.
My portfolio has good companies, however it has been stalling this year. I’ve approximately $700k stagnant in my reserve that needs growth, any suggestions to grow my portfolio will be highly appreciated.
Hey Joseph, I love your content and I mean no hate. What I think you missed to mention was yes, 50% of the index outperforms the index. However, what that 50% is is constantly changing. Therefore, I need to change what I'm investing in more constantly. This additional buying and selling creates room for error. Much easier to just buy the index
Agreed! With individual stock picking you need to get at least two major decisions, which company and when to buy. Index only requires you to make the one decision of when to buy (oversimplification but you get my drift)! Still love individual stock picking though...
No there are companies over a period of time that out perform and it tends to be shown by their performance.
I feel investors should be focusing on under-the-radar stocks, and considering the current rollercoaster nature of the stock market, Because 35% of my $270k portfolio comprises of plummeting stocks which were once revered and i don't know where to go here out of devastation.
Safest approach i feel to tackle it is to diversify investments. By spreading investments across different asset classes, like bonds, real estate, and international stocks, they can reduce the impact of a market meltdown
A lot of folks downplay the role of advisors until being burnt by their own emotions. I needed a good boost to stay afloat, hence I engaged the services of a true market strategist to help rejuvenate my $700k portfolio and boost performance and returns by 40% in a little over four years.
impressive gains! how can I get your advisor please, if you dont mind me asking? I could really use a help as of now
I'm being guided by “Nicole Desiree Simon’’ who is widely recognized for her competence and expertise in the financial market. She has a thorough understanding of portfolio diversification and is regarded as an authority in this field.
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
Joseph this is a bit misleading. You only have to pick the top 100 companies of the year, but those top 100 are not always the same year to year. That infers youre constantly reshuffling your portfolio each year. This includes a lot of timing - not holding and waiting. Buying an ETF guarantees the opposite.
He is also selling his software platform focused on ind stock analysis so maybe some conscious or unconscious bias at play here.
I'm glad I got into crypto when I did because it’s been a turning point for me financially, been my best decision so far.
Inspiring! Do you think you can give me some advice on how to invest in a healthy way as you are doing?
Bitcoin has been falling for a while now and could fall further or close to rise again. The truth is that no one knows, I believe it's the right time to buy and also get a pro's assistant
Isn't that the same Mrs. Claudia Jenkins that my neighbours are talking about, she has to be a perfect expert for people to talk about her so well
Please how can I contact this woman Claudia Jenkins? I will also like to invest with her
Wow it's amazing to see others who trade with Mrs Claudia Jenkins, I'm currently on my 5th trade with her and my portfolio has grown tremendously all thanks to her.
Idk man I think you are underestimating how easy it is to look at stocks that have outperformed in the past few years or any timeframe. Infinitely easier than picking them BEFORE they outperform. And then another dimension is holding them for an appopriate amount of time. Why hasn’t your portfolio beaten the market? The one that you designed to do just that. Is it easy? For how long can one beat the market? Most fund managers only do so for one year or 2 and then proceed to underperform.
Yep, I like Joseph videos, but he is way too optimistic as for stock picking.
Past performance does not guarantee future returns. Low cost indexes deliver better risk-adjusted returns, compared to self-managed portfolios. That’s why they are a best investment for most people - buy&forget. Joseph is exceptionally talented, hard working, and makes money from YT building his brand while picking stocks. He is disciplined and does his research. He’s 1%. I wish that he beats the market over the long run, but even if he won’t, he’s already set with his multiple finance-related side hustles, personal brand and a dev job. He’s willing to take outsized risks for a greater reward.
I am an etf investor but had confidence following your videos for over an year with single stocks. Picked up my single stocks last year such as amazon, tesla, etc. as your compelling points made sense to me even when they were getting thrashed instead of adding to s&p500. My individual stock is up 50% this year while index in 10s.. So thank you 🙏
That's what we like to hear. Well done.
Best example of chasing performance if I've ever seen it.
I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my portfolio for retirement of about $150k. I want to know: Do I keep contributing to my portfolio in these unstable markets, or do I look into alternative sectors?
Keeping some gold is usually a wise decision. You would be better off keeping away from equities for a bit or, even better, seeking advice from an expert given the current market conditions and everything that is at risk with the current economy.
A lot of folks downplay the role of advisors until being burnt by their own emotions. I needed a good boost to stay afloat, hence I engaged the services of a true market strategist to help rejuvenate my $700k portfolio and boost performance and returns by 40% in a little over four years.
I'm being guided by “Leila Simoes Pinto’’ who is widely recognized for her competence and expertise in the financial market. She has a thorough understanding of portfolio diversification and is regarded as an authority in this field.
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
Notice how Joseph doesn't sell a course? He simply educates us on investing in the best way possible.
But it are not always the same companies that outperform the SP500 each year! So you still have to switch each year to the companies that you believe will outperform... you can do that maybe once, but doing that each year, year after year? and why would you change exactly at 1st January of each year?
I think the more important takeaway is that 99% of people would be better off using their time to increase their income vs. beating the market with timing or stock picking.
The amount of wealth lost due to not raising your income from $50K to $100K over the first 10 years of your career is going to make a bigger difference in your life long term than taking a 40/60 risk on whether you beat the market in a good year and 25/75 bet in a bad year. Not good odds when you have much more control and a higher probability of success developing skills, increasing income, and just buying the market.
If the average person spent 2 hours a night investing (researching) they would probably double their wealth. Most people are not interested in doing that. They clearly do not want to work the extra hours in their job.
@@Art-is-craft I would say those people represent the vast majority of people in the world. And those with that mentality are the ones who will continue to work hard every day to keep the upper class, who do put forth the effort to improve themselves and the rest of society, wealthy.
I think the argument for buying the index is more about returns to effort ratio. If you are a professional who love your career and do not want to dedicate time to learning how to property research companies to successfuly beat the market, then you're probably better off just buying the index and focusing on leveraging your career to provide a solid income that you can then systematically invest passively. I think this is specially true for those who don't necessarily enjoy keeping a constant eye on their investments.
I 100% agree. If you don't enjoy stock analysis, this is not the thing to do. You have to derive some level of enjoyment in the process itself to make it worth it.
But also - the effort depends on portfolio value and level of outperformance. The difference between a 8% return and 15% return over a number of years, with a decent amount of capital, is massive.
@@JosephCarlsonAfterHours Yes, you have to enjoy it. Every procent above market counts. 15 % is a nice goal, however but way too optimistic to have it as realistic scenario to reach it consistantly in 2-3 decades.
@@JosephCarlsonAfterHoursBuffett himself has directed his widow to keep her inheritance investments in the S&P 500.
@@mikev4373 which at this point in their lives I think is hilarious. He's like 90 and is worth $100+ billion. His wife could spend the rest of her life trying to give the money away and utterly fail. She doesn't need to invest any of it.
not only return to effort, but also return to risk. I doubt stockpickers have portfolios of 500 stocks. Most are more concentrated.
Research shows that from 1980 - 2006 - 75% of the stocks held by Berkshire had a holding period of less than 2,5 years and 60% sold within 1 year. I'm still at a crossroad regarding whether or not to liquidate my $138k.
Find quality stocks that have long term potential, and ride with those stocks. I have found it takes someone who is very familiar with the market to make such good picks.
Right, when it comes to situations like this, it's ideal to engage in various options using an advisor, and I can attest to success of the basket approach seeing my portfolio grow from $350k to almost $1m in barely 3 years, by far my best financial milestone.
@@VanPelt54u7fcyde57 wow massive gains! my partner recently hinted on going same direction.. what did you invest in, and who is your investment advisr please, if you don't mind me asking? in dire need of asset allocation.
Can't divulge much 'Monica Amanda McClure' deserves credit for my investing success as one of the finest financial planners out there, you should be able to locate her online if you are an internet-savvy.
I searched her name and her website popped up immediately on google, interesting stuff so far, about to schedule a session with her.
Hi Joseph,
I've been beating the market effortlessly for a long time. I don't really like ETFs; I hold about 2-3 of them in a relatively small amount, but I prefer to invest in individual stocks. I have only a few criteria: growing revenue, a rock-solid market position, a fat margin, and finding minimum 5-10-15 year periods where the company has outperformed the market. Obviously, I'm not giving any advice, but in my portfolio, I have SPGI, UNH, LOW, HD, AWR, MA, V, MSCI, ICE, PH, BRK.B, and a few other well-performing companies for decades. Of course, a smaller slice also goes to the magnificent 7, but they don't get more than 15% in my portfolio. I confidently outperform the S&P 500.
What is your opinion on this?
Makes sense
I watch like 10ish videos of financial content creators everyday. Everybody is gloomy and talks about recessions with big fire emoji in their image. It gets me a little stressed. Then i watch a well made a deep researched video of Joseph. Calms me down like a good cup of tea. Overall i don't really listen to any content creators advice and i just try to stick to my portfolio plan for the longest time possible. Thanks for the content.
fears sell.
@@Allen-L-Canada indeed. Must not give into it hahah i would have sold Nvidia at 400$ if i listened to everybody saying it was overvalued. Now its at 478$. Longevity is key
@@medericgosselin7326it may or may not be over valued. But if you’ve valued it based off it’s financial statements then you’ve got your conviction to back your position. Sometimes a holding will be over valued to its spot value.
Having an investment goal and strategy also helps with conviction of the companies you own
I strongly suggest you unsubscribe to those Aholes. As Allen said "Fear sells" and they are looking for clicks and eyeballs on their videos. They are not worth your time
@@ryanadams0922 yeah, I’ve also unsubscribed many of them.
You have missed something, the data you show contains different companies each year. Trying to find companies that will beat the S&P over many years is more difficult, not impossible, but taking outperforming figures for such short periods doesn’t paint the true picture. 29 month holding period is very short. Find the companies you can hold for ten or fifteen years which is much more difficult.
Hi, Joseph. You say every year many shares beat s&p500 and you give names. But how many the same shares beat s&p500 past year and current year, for example? I suppose from 10 to 30 companies, it mean the main task is very hard. I must buy and sell from 80 to 100 shares every year. And we must remember about taxes in this strategy.
He has to do whatever he can to justify the idea that one can and will easily beat the index. Otherwise his channel would be, "Watch me underperform a well diversified lost cost broad index fund." I'd still watch btw, Joseph is entertaining.
I personally think the Rhetoric behind not being able to beat the market is that most investors, probably 90% no matter how good they may be; do not have the stomach to hold their single stock holdings in a massive downturn and will most likely panic sell when they see the price drop by 50%. Hence forth it is smarter to tell people to invest in index funds because they are more likely to hold onto them and have positive returns over time. Its not that people cant beat it but its more of a protection against ignorance.
Agreed. I'm holding DIS and WBA for 3 years now. Every time I look at them I wish I would have put that $ in an index instead.
Most people believe majority opinions. This makes most people bad investors.
They sell at lows because that’s when everyone “realizes” not only that things are bad, but that they’ll probably get worse.
If you trust experts to know better than you do, you probably shouldn’t pick individual stocks. Because you’ll trust them when they say it’s time to get out.
Listen to your doctors. Don’t listen to the professionals on Bloomberg and cnbc. Investing is where it’s actually correct to distrust the experts. If they’re all correct that it’s too dangerous to own at the moment, that means they all already sold. Which is why they’re incorrect. Consensus is usually correct… except in investing.
@@rosejackson3849same dude I bought a ton of disney when it was trading at like 88 just to then watch it crash down to below 79. never sold it though and it's starting to come back finally it seems. then i look at my index fund i bought into in october of last year and it's up over 25%. it's tough.
@@rosejackson3849I know that feeling 🤣😅
you took an arbitrary short period. calculate the same for the same companies over 40 years and all these companies will give a profitability comparable to sp500
I believe the needle in the hay stack analogy is largely based on the work done by Hendrik Bessembinder in his 2018 paper ‘do stocks outperform treasury bills’ The data suggests that between 1926 and 2015 the majority of stock’s buy and hold returns have underperformed one month treasury bills. He further went on to demonstrate that the returns of the top 4% of companies was enough to explain the total return of the stock market in excess of treasury bills during that time period. The remaining 96% of stocks during that time collectively earned as much as one month treasury bills. 58% of all stocks actually underperformed one month treasury bills. This suggests during that time period most investors would have been better taking on no risk rather than investing in individual stocks. It was a very important paper in finance academia.
True. However there are a lot of stocks on the stock market and many that went out of business within that timeframe so it would make sense. If you set parameters regarding the types of stocks the results would change dramatically. It’s like saying the majority of humanity can’t slam dunk on a professional court. This is true, however if you choose people within a higher height range the statistics change dramatically. There are many businesses starting every year and making it public constantly, but ultimately going out of business. The market is highly competitive. The interest rates on treasuries have fluctuated dramatically in the timeframe mentioned. Very rarely were they near zero, so of course if you are accounting for all stocks, many that went out of business you would have faired better in treasuries. But many of those stocks wouldn’t even make it into the sp500. So, if anything the study is showing to be weary of new companies, very few are competitive enough to make it.
@@saneb5955 the study itself makes no conclusions on how one should invest or what they should be wary of. It was just a analysis on skewness. That said it does say that it does support the importance of diversification for those investors inclined to focus on the mean/variance of portfolio returns.
I don’t think we can necessarily say that ignoring new companies would improve the results either, but maybe it would. Bessenbinders paper doesn’t address that particular question , but perhaps others do. But if you want to ignore new companies, then you’re also going to have to ignore some of the select few companies that actually drove the overall performance of the market in excess of one month t bills as well and in particular ignore them during the time span that they may have had most of their gains.
Yeah… I kept waiting for the punchline but it never came. I totally get what you’re saying. That it’s technically, literally, possible to beat the index. But I think that conventional knowledge doesn’t so much declare that you can’t but rather than it’s almost impossible to consistently do so and continuing to do so carries high risk. Hindsight is 20/20. When you go on the list and see all the companies that outperformed, it’s easy to say that you had a higher chance at beating the market than one originally thought. I agree with “knowing what you own”. The reason it’s difficult to beat the market is because at this point next year or in 5 years, you won’t know which companies will be on the list of those that outperformed the market. Just my view, not trying to be rude or argumentative.
I think the video started out weak with the one year "how many stocks outperform the index in a given year", I think this should have been done over longer periods. How many of the s&p 500 in 2005 managed to outperform the index until now? The rest of the video was a good though.
The fact that this video is free makes Joseph one of the TH-cam legends in the Finance space. Life changing advice here, I've been investing into individual companies for only under 4 years now and even with making a ton of rookie mistakes, I've beaten the market 3/4 of those years so far, and this year I've doubled the market return YTD. It really isn't as hard as the media and fund managers tell you it is, literally anyone can do it if I can, and people like Joseph are to thank for a good bit of that. Thanks for the knowledge always :)
get back with us in 35 years - happy for you tho
What are you holding?
I got into investing from a meme stock hype phase and got really lucky and thought I was the s***… In reality I wasn’t. I didn’t know anything and I still don’t know much. I’m trying to change that. I’m watching these TH-cam videos everyday, reading articles and trying to do my own due diligence. I want to look into taking a course to get the fundamentals down as well. You made me just realize why I’m not seeing big tendies in my baskets and it’s due to my impatience and hype (price) chasing. That’s not the way. Investing in companies that offer good utilities and fundamentals with growth potential is the way. It’s so simple it’s obvious. Even a smooth brain ape like myself can understand that. Pigs get slaughtered.
RIP Charlie
Great video, with really useful data. Well done!!! Would add to this, the misinterpretation of the "forever holding period" as Buffetts preferred holding period as a basis for a "buy and hold" strategy to get a balanced view. Research shows that from 1980 - 2006 - 75% of the stocks held by Berkshire had a holding period of less than 2,5 years and 60% sold within 1 year.
Fund managers are biased to tell people that they CAN'T beat the market, Finance TH-camrs are biased to tell people that they CAN beat the market.
True, difference is the TH-camrs like Joseph are teaching you exact methods they use for their investment choices and show their honest losses and gains. They aren't casting an ambiguous shadow of doubt over the whole process to make it feel out of your bandwidth.
@@notan3144 yes, Joseph’s teaching will increase the odds of us beating the market. The biggest variables are how well we follow him, and how much commitment of time and effort we practice those principles.
If you back what you say with relevant data, you’re not biased
@@ashkanzaker6077 a biased person will find confirming data to fulfill his bias.
in his 2016 letter to shareholders,
Buffett explains that while there are of course
some skilled individuals who are highly likely to outperform the S&P over long stretches.
he's identified early on only 10 or so professionals
that he expected would accomplish this feat.
Buffett does acknowledge that there may be hundreds perhaps thousands
of people out there who can accomplish this feat,
but even still we're talking about a tiny portion of the population early on is an important qualifier
in Buffett's sentence.
I think looking at the rate of professional investors beating the market is important. You will find that very few outperform over a 15 year period. So, I'd say it's harder than you make it seem. However, I must admit that the statistics you showed with how many companies beat the market was eye opening. I saw the article you were talking about and I agree they made it seem like it was harder than it actually is. Though it seems like this year is the year that it was the most "accurate".
Does not make too much sense. As you said final results of far majority of professional investors are bad. So it is obviously hard to choose the right companies consistently.
Joseph, curious on why you don’t show your unrealized gains on M1? Not hating cause you are still the best on being transparent
Wow great video Joseph. Been watching since 2020 and the hits keep coming. I don’t always agree with you which is kind of fun. But This one had me thinking for a long time about how you’re exactly right and I had never thought of it.
Peter Lynch's find is probably one of the best performing funds in our history the funny thing is most people who invested in this fund actually lost money because they went into all this fund when it shot way up to buy it and then when it pulled back they sold for loss it was a volatile fund the people kept buying when it was high and selling when it was low 😂
Not to be a downer, but it's one thing to look back on the year in December and say "you should have picked these stocks". But it's another thing to pick those stocks on January first and hold them all year. What stocks will be big next year? Where would you dump, say, $10,000 on January 1?
One thing I've wondered about is the methodology Warren Buffet uses to select stocks and how he chooses to run Berkshire Hathaway. According to his biography he looks for companies that have a wide moat, good fundamentals, and best a lot of cash. He collects dividends until he figures out how to get a seat on the Board of Directors or vote shares that he owns or controls to have the cash paid to the shareholders. Berkshire Hathaway owns or controls large insurance companies that operate in regulated markets which other companies can enter. Berkshire Hathaway doesn't pay a dividend, has a ton of cash, and hasn't split shares in decades. Berkshire DOES NOT return cash to shareholders. The way to make money in Berkshire Hathaway stock is buying and selling or capital appreciation over time. Why would anyone, especially Warren Buffet, buy Berkshire Hathaway stock? There was a period between between 2000 and 2010 when Berkshire Hathaway had no capital appreciation in a decade?
(Moast as in monopoly)
Just buy the stocks that will perform better than the index. Easy. And for sport bets, just bet on the winning team.
🤣🤣
It honestly just comes down to patience most of the time.
I am outperforming S&P500 by 4.7% YTD
You CAN.
Just like you CAN win the Lottery, "CAN" doesn't mean you WILL or are are even LIKELY TO.
just came up with a strategy: buy stocks that underperformed last year, sell stocks that overperformed last year
The other half of outperforming is avoiding the companies that perform very poorly. Those are probably easier to point out. Nice work
Great content as always. Can you please make videos on
1. When to sell a stock? Especially when the company goes overvalued even though fundamentals looks great.
2. How to analyze a stock i.e factors & metrics to consider, PE ratio, revenue, cash flow, profits etc.. step by step and together as a winning combination.
When everyone knows that it’s a great company to own, a great buy.
That’s the biggest clue that it’s time to sell.
@@SigFigNewton not exactly , would you sell AAPL, MSFT ?
@@SigFigNewton thanks for the response. However, i don't fully agree on this point. This is too generic and doesn't always mean that company is overvalued and up for correction.
@@manojramnani7637 not always, but it’s been good at keeping me out of trouble. Buying only low cost mutual funds and etfs or specific companies that people have been pessimistic on for months has had me beating the S&P500 for years even though my biggest mutual fund has been lagging the S&P500. Gotta have additional criteria of course, but people being near term negative on a company is a common trait of the bets I’ve made that have been winners. It’s all about buying the thing before others do, and they only publish positive stuff about the company *after* they already bought in.
If you’re thinking of trying out contrarian investing,
1) prioritize good balance sheets. Helps one be certain that a big drop in share price isn’t part of a path toward bankruptcy
2) be picky. Mutual funds are great, so only buy individual companies when you have enough confidence in an eventual recovery that you’ll buy more when the price drops. Instead of selling low, confidence lets you view further dips as an opportunity to lower your average buy in.
3) cyclical companies are your friend. Cyclical stock = occasional great buying opportunity.
4) always be content to miss out on great opportunities. You’re right. Following the advice from my first comment can lead to missing out on gains. But it’s also a great way to miss out on losses.
It doesn’t matter if everyone is right to be nervous about having their money in the market. When enough money is right about that, they all become wrong. Simply by being in agreement, they become wrong. The bad things happen, or they don’t, and eventually when they perceive that conditions are better going forward (correctly or otherwise) they buy. I profit. I won’t ever have the data or foresight to plug in better inputs into a discounted cash flow analysis and outperform hedge funds at fundamental valuation. But I am willing to miss out, willing to buy when it’s so obviously a bad time that it’s a good time, and I reckon I have a knack for recognizing a cyclical downturn in a long term secular growth trend. Im also wrong all the time, but not enough to matter. Or maybe I’m simply lucky so far.
Problem is long term investment, 5 to 7+ years long. Can't sustain picking up individual stocks that long (for me working full time office job).
Great video joseph .VERY WISE & INFORMATIF KNOWLEDGE !!.thanks
Most compelling argument I've seen, but there's something you overlooked, it changes what the 40% of overperforming stocks are. Over long periods of time- it's near impossible
Only about 20% of stocks overperform over a 10 year period. You can absolutely pick a winner over a short period of time- but the best performing stock in spx from now until 2033 is probably not one of the Mag 7. Only 42% of stocks from 1926-2016 beat T-Bills!!!. Half lost money!
Is it possible- I , assume, especially if you're dealing with not crazy large amounts of money. better uses of time- for me at least yes.
Thanks for the reminder. There's institutional money, smart money, dumb money, and average money. Institutional money mostly loses to average money, (the institutions don't care because they still get rich on commissions), average money loses to smart money and dumb money loses to everyone else. The very existence of this dynamic means some investors must necessarily beat the market. The goal is to put yourself in the minority smart money category. You don't just find yourself among smart money, you have to do the work to get there.
This is one of your best videos spreading the truth about investing nobody talks about!!!
So much noise from everyone else...
While I agree with your overall sentiment, looking at YTD or annual performance means nothing. Plenty of garbage companies with garbage performance over time have fantastic individual years. It’s true that it’s more than seven companies but it’s not like people can realistically time every one of these companies. This doesn’t negate your point as much as dilute it.
Videos like this are inspirational. So much gets said on the topic of market performance that is objectively wrong, and yet so many of us unthinkingly accept the pessimistic narratives. It’s great that you’re able to challenge them with simple data and rational arguments.
R.I.P. Charlie Munger on Nov 28th at 99 years old.
Joseph doesn't mention the the higher concentration than SP500 as one of the ways towards outperforming.
The more concentration the higher the risk though..
Wrong content entirely ! You need to check overlap over the years of stocks beating SnP not independently look at how many stocks are above SnP. Ofcourse SnP is weighted average so in best case there will be 250 stocks beating market and this is more likely situation where 125 stocks are pulling market up and 375 are pulling it below. If you go to 5-10 year period you will quickly realize there are only 30 odd stocks which beat SnP, all other 90 stocks that performed this year will most likely drop or grow very slowly.
Great content, Joseph. Like your straight forward approach.
I don’t disagree, it is difficult I am not going to say it is easy but in my current position, almost the majority of my higher gains are with individual stocks vs the index/ETF’s I own. I typically debate on what might be better long term and I am just trying to understand my strengths and weaknesses as an investor. I am planning to be a long term investor, I am still learning but so far I’ve noticed that my most disastrous performances have been my initial buys where I understood less of what I was doing. I guess time will tell how well I can do in the future but I am definitely willing to learn from my errors.
could i ask how does one sort through the sheer number of stocks and know which stocks to even analyse?
Amazing perspective Joe~ Thanks for sharing as per usual. You're a great teacher
Why is AVGO not part of the magnificent 7??
Charlie Munger RIP
If you don’t sell a course you’re not selling bullshit. Love this channel!!!
They say that you shouldn't try to time the market because missing out on the 20 best days can cause you to drastically underperform, but what if you miss out on the 20 best days and the 20 worst days?
Same with companies. Sure, you might not have Nvidia in your portfolio, but that will be more than made up for by not having Icahn Enterprises and other underperformers in your portfolio, so overall, you'll beat the S&P 500.
You can of course always debate whether it is possible to outperform the market or that it is just luck if you do so. Reality is that most people don't have the skills needed and if they have the skills, the time, energy and costs associated with the research most likely more than compensates for the out-performance. Spending that time in a productive, paying job is financially far more lucrative. The market is certainly not perfectly efficient, but capitalizing on the inefficiencies is less straightforward than it may seem as there are lots of hidden traps.
I totally agree. I've been contributing to my government TSP fund for 13 years now but this year after getting divorced and having to give half of the balance to my ex-wife I decided to start up an account with Fidelity. Since I opened my account in October I've outpaced the market. I know October to the end of November isn't long but I definitely believe it's easier to beat the market than what we're told.
Higher returns are generally only possible by taking on higher risk. Most invested money is managed by professionals on behalf of others.
Part of why you may be able to beat the market long term (maybe it’s not a fluke?) is that they do not think that they have the right to take on a lot of risk with other peoples’ money.
Remember this advantage that we have.
Other advantage for myself that I keep in mind is I’m pretty sure that I’m good at gauging sentiment… and behaving opposite to consensus.
So I have been successful in buying cyclical companies when everyone else “knows” that it’ll only get worse for them.
(When there’s almost nobody left to sell)
The important part is "do the work". Allocating capital is a business. You're not even factoring in the value you get from buying at the right time & prices. This can massively improve gains from an individual stock pick than looking at an arbitrary period of time like Year-To-Date.
Great video as always. I would encourage you to compare the returns of the S & P vs. a fund like Vanguard Total Stock Market or Berkshire B and see the results. They are pretty surprising. You are right in that picking individual stocks requires due diligence, maintenance and a cool head. Compared to investing regularly in a good solid ETF, managing an individual stock portfolio doesn't just take "a little bit more effort" , it takes "A LOT more effort."
This is mostly a video about what is possible with good research and investing long term, but as Warren Buffet has pointed out, if you invest in the S&P 500 you will outperform even 97% of professional investors. Joseph already pointed out the return performance of the average investor. Not good. Still, I enjoy investing in individual companies.
I’ve learned so much from your videos appreciate it 👍🏼
This is too short term and you got some bias for using year to date. It’s nearly impossible to outperform over a long period of time. A monkey could outperform for one year.
Great Video Joseph...love it!!!
Not to mention, a small or mid cap could 10x and still have zero effect on the overall index as well, only a small portion of total market caps actually effect the market
Joseph, I agree that investing is not gambling if you are basing your decisions on data. However, I disagree with the premise that we have the data. The data we have is given to us by the corporate insiders and officers. We rely on their honesty and accuracy when reporting earnings and struggles. We know from experience, companies "cook their books" from time to time. So you have to admit, your decisions are based on incomplete information and possibly even outright false information at times. The issue is, we have no way to verify the data. We simply rely on the data we are given. I invest individual stocks based on a common sense metric. I look at the product and service and analyze if I am or would be a customer. Then I look broadly at the future probability I will continue to be a customer or if others would. I also enjoy watching you. I like watching you because you reference great sources. Watching you is like Cliff's Notes of investing strategy as advocated by our modern world's best investors.
...even to have the data is not enough. You have to have them first (or among firsts) and also interpret them in the right way regarding unknown future.
Yep anyone can beat the S&P. But over a life time vary few do.
One of your best videos Joseph! But it would be interesting to see how many stocks actually outperform over a 3-10 year basis
yeah. you probably will not move in and out of like 30 companies over a big timespan at always the right times
Would like to see a video of the stocks you are looking at adding in the 2024 year. A in depth dive into why . Thanks
Excellent show joseph Carlson
People even say mutual funds can't outperform but my mutual funds beg to differ. I just started and day to day my portfolio outperforms each day sometimes double th index.
Another question about "copying" investments: why u look on best individual investers but not on ETFs?
I'll preface this by saying I love your content and will keep watching, but I think you're underselling the risk of individual stock picking and overselling the potential gains of it on that 1. You obviously have a bias towards being an active investor and while your approach is smart and well thought out by researching the fundamentals of your companies, investing in a low cost index fund will get you to your goals over a long term horizon and that's what most people need. Actively picking and managing stock brings a much higher risk but it doesn't come with a higher expected return. The best of the best will beat the index for a couple of years but won't over their lifetime, and I'm sorry to say but a good part of their success was indeed luck. Investing isn't about beating the index, it's about growing your money at a risk tolerance that won't affect your behaviour in a negative way for future goals, retirement etc.
I'll end this by saying that although that was a nice Peter Lynch quote, Warren Buffet, one if not the best active investor of all time, tells the average investor something way more sensible and to just pick an SP500 index fund.
Thank you for this video. Now I can just forward this to my family members who are old school & think that I am "gambling "
What is hard is to consistently beat the market for multiple years (5 or more). 99% is not able to achieve that. Most people think they are the 1% but you are probably not.Having said that i still also buy individual stocks :)
So I am not sure of any company that has consistently outperformed the S&P500 index on a yearly basis! Even AAPL has only outperformed the index 20 of the last 30 years! I think the goal is to accept that good companies may sometimes underperform the index but that if we target good companies the outperformance should outweigh the underperformance!
I take it back. Wingstop has outpeformed the S&P500 every year since its IPO, but clearly the stock market doesn't read the calendar! I think the lesson we all learn is to try to buy great companies and great to fair valuations!
@@TheFoodFund
Compounding wealth does not work like that. It does not matter if a company under performs for one year. It is their average performance compounded over a decade that counts.
This is a really good video. Really good! I appreciate the unique take.
Using YTD returns as example of why stockpicking is better than the index is really stupid
One of the best investing channels. Thank you, Joseph
Do you plan to take a Look on the Outperformers and Underperformers in every Year to see the most significant Differences. Do you look for Patterns. Excluding the Corona Year. Would be an interesting research.
When you need to find a needle in a haystack, bring a magnet.
Beat the market last year, and the year before.
This is misleading. You highlight how many stocks beat the market in a given year (12 months) so it's not hard to beat the market. YET you also mention that 10 (or 12) months is a short holding period, which is what your initial argument was based on. I'd like to see how many stocks have beat the index over 5-10-20 year period instead. That would be a better video!
He is just showing that the market is not based on 8 companies.
It will be harder now to find companies that will outperform t he market now that rates are higher. i have managed to out perform the market in the past and I didn't own alot of the high flyers. Keeping pace with it or close with it is doable. It depends on the type of investor you are and if you have a decent approach as to how a portfolio should run. If you're swinging for the fences with every holding and not putting in the time to research and know what you want.... then buy an ETF. Owning stocks comes with commitment that's for sure. Happy hunting all and Merry Christmas.
Great video. I need to watch again, but I wonder if there are other factors at play. If you can easily filter out the worst 10-20 percent of stocks as duds, your odds should increase. I wonder if a lot is in purchase timing: maybe people(including financial advisors) tend to start buying stocks at the wrong time, say after periods of high returns/media attention.
The thing is, you MUST “time the market” inasmuch as you cannot afford mistiming it. It becomes an issue of how precisely you can time and all that you ultimately need is to be close. Catch inflection points within a couple of ticks and then hold. Miss them and you start chasing performance which is futile.
Joseph when will you start using the Nasdaq 100 has the “market” instead of SP500?
RIP CHARLIE MUNGER
Hi Joseph. I enjoy your in depth analysis. I think CME group is a company that will fit your bill on investing. Would you be able to do an in depth analysis of this company?
Have you covered when to take profits?
I generally take a quarter of a position when it's over several hundred % return or has become way too large a single holding (like 20%)
I thought everyone sells on December 31st and buys on January 1st? 😂
@@kevinlue4756 🤣