Must everything be an index ETF or is there room for retail investors to begin buying individual stocks again? Can a regular investor, one without a high frequency algorithm, a Bloomberg terminal or any formal Japanese candlestick charting expertise read up on a few stocks and just buy them?
My friends at Ultimi Barbarorum say yes, yes they can. And perhaps they should.
So let’s say it: I think the best thing for moderate net worth retail investors to consider right now is to take their retirement account back into their own hands. I think people should start to do some research with the aim of buying 3 to 5 single stocks, maybe just as an experiment. And if the experience is good, they can do it, and they gain expertise, they should make single stocks a big chunk, say 1/3 or more, of their retirement account in the next 10 years.
Baruch and Bento pore over the ancient texts of Peter Lynch, those seminal works that got the Baby Boomers buying “what they know” way back in the halcyon days (the 90’s) of large cap brand-name stocks.
The Peter Lynch message could be boiled down to this for the mom-and-pop investor:
“Good shopping experience at the Home Depot? Research it and buy the stock.” “Liked taking the family to Disney, do the same” “Stick with things you understand and do the work.”
This is very basic, bedrock stuff that we’ve gotten extraordinarily far away from in the investor class.
Everyone’s favorite Spinozan philosopher-bloggers take us back to this lesson, tell us to ignore the “advice” from the Salmons and the Altuchers and exhort the retail investor class to think about getting back to stock-picking basics once again.
If you read little else this weekend, read this. And if you work in finance, I know it’s tempting but try not to treat the mere presence of retail investors as an automatic signal to sell everything. Retail stock investors built this nation’s markets long before Alfred Winslow Jones invented the hedge fund.