🧠 Why I don't pick stocks

Hi everyone, and thank you for all the great feedback on the Index ETF course!
It sincerely means a lot to me, that it could help so many of you! 🙏 

Many of you mentioned that justetf.com was quite overwhelming to navigate.
I'm currently searching for a more user-friendly alternative and will share my findings with you soon.

You also asked why I focused on ETFs rather than picking stocks.

Let's examine why decades of market research shows Index ETFs delivering better returns than individual stock picking for most investors

But before we dive in, remember that investment choices are deeply personal.
Your decisions - whether ETF or not - should align with your financial goals, risk tolerance, and how much time you want to spend managing your investments.

Individual Stocks: Direct Ownership in Companies

When you purchase a stock, you're acquiring partial ownership in a specific company. 

This means you can carefully select businesses where you see strong market potential. Where customers, other investors, and the broader market believe in their future growth.

Some investors find great satisfaction in researching and choosing their own stocks (especially when they are proven right and can benefit from that growth 😌).

However, building a properly diversified portfolio through individual stocks requires significant capital, time and expertise.

How does it require more capital than ETF?

With individual stocks, you typically need to buy whole shares.
And shares of major companies often cost hundreds or even thousands of euros each.
This requires quite some capital and usually doesn’t allow investors to “start small” and go through a learning curve.

If you want to have an idea around stock prices for specific companies you can use free tools like Yahoo Finance.

When you buy an ETF share, you don't directly own fractions of companies - instead, you own a share of a fund that holds these companies.

In Europe, most ETFs are UCITS funds, where the fund company (like Vanguard, iShares or Amundi) legally owns the underlying stocks and holds them in trust for ETF investors.

(UCITS funds are Europe's gold standard for investment funds → they follow strict EU rules on diversification, transparency, and asset protection, making them one of the safest fund structures for retail investors.)

Why does it require more time and expertise to pick stocks than ETF?

You need to research multiple companies, understand financial statements, take into account economical and political context. Even experienced investors can see their carefully chosen stocks underperform the market.

With individual stocks, your returns depend entirely on the performance of the few companies you select.

In contrast, an ETF's diversification means you won't capture the full upside of top performers, BUT you're protected from individual company failures.

Most professionals fail to outperform the market over time.

Active funds are managed by professional investors who attempt to beat the market by carefully selecting stocks, timing trades, or adjusting their portfolios based on market conditions. These funds charge higher fees to cover research, trading, and management costs.

On the other hand, index ETFs take a passive approach, they track a market index without trying to outsmart it. Since they don’t require as much management as active funds, they have lower fees.

The latest reports from S&P Dow Jones Indices (SPIVA Europe 2023) and Morningstar's 2024 European Active/Passive Barometer confirm what we’ve known for years: most actively managed funds fail to beat their benchmarks.

• Over the past 10 years, 84% of global equity funds failed to beat the market (S&P World Index).
  In France and Italy, the underperformance rate was as high as 90-98%​ 🫠 

• According to Morningstar, only 17.1% of active stock funds outperformed their passive counterparts over a decade​ 🫠 

• Many active funds don’t even survive: nearly half shut down within 10 years, often because of poor performance 🫠 

The Bottom Line

If even professional fund managers, with access to the best research and technology, struggle to beat index investing, what does that mean for the average investor? 🙃 

For most people, the smartest strategy is sticking with low-cost index ETFs, minimizing fees, diversifying risk, and letting long-term market growth work in your favor.

What’s your take? Have you ever tried stock picking or do you prefer index funds?
Hit reply and let me know!

If you know anyone that could benefit from this content, please forward them this email.

Take care 🙂 
Nessrine

Disclaimer: This newsletter is for educational purposes only, not financial advice. Always do your own research before investing. Remember that with any market investment, including ETFs, your capital is at risk and can decrease in value during market downturns.