Recently, I’ve listened to Warren Buffett and Howard Marks tell me that I really shouldn’t be picking stocks. Warren states he has met maybe 10 people who should be picking stocks, the rest should be buying indexes. What makes it worse, is that Warren Buffett also doesn’t believe in efficient markets. So, they are inefficient AND I can’t take advantage of them? That really puts a guy’s ego in its place, doesn’t it?
This is the part where I should say, “Here is why I am going to be OK”, “Here is why I’ll do better than the mass of people out there on Wall Street aiming to do better than me”. The honest truth is that I simply don’t know that I’ll do well. I’ve already made several giant blunders. Buying the market even at what I believed to be an irrational high might have been better than letting me pick stocks.
Moving forward, I’m going to continue trusting my process. That doesn’t mean I’m going to beat the S&P 500. The process does not guarantee that. All I’m guaranteed is that I’ll hold 6-10 companies that I like once all my capital is deployed. That’s it. I might hold Pets.com, Enron, GE, etc.
Four and a half years from now, I’m going to have my first real check-in. If my performance is lackluster, I’ll seriously need to consider capitulating and buying nothing but VOO, or IVV. Furthermore, if my performance has been spectacular for reasons I couldn’t have guessed, I might want to capitulate and move everything into VOO or IVV. No reason to double down if you don’t know why you got there.
Lastly, I’m still not ruling out the markets giving me a free pass. If the S&P were to fall enough, at some point it would be the best investment choice out there.