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The point of yesterday's post was misconstrued by many so must have been poorly conveyed by me. For the do-it-yourselfer;
1) Focus on the real goal which for most is having enough money when you need it, not necessarily beating any index. Having enough when you need it comes from a combination of savings and growth.
2) Someone who wants to use individual stocks but not make a full time job out of it could probably pick ten household megacap domestic names, combine that with an adequate savings rate for the next 20 years and have a decent shot of having enough money when they need it.
3) If over the next 20 years the S&P 500 goes up 400% then in my opinion picking ten stocks from the current top 40 in that index and spreading it out sector wise might give a result of up 300% or maybe up 500% (or any other number) but get the investor pretty close to having enough for retirement provided they also have an adequate savings rate. They will not be up 1000% in an up 400% 20 year period nor will they be up 50% in an up 400% 20 year period.
4) More specifically, of the ten it is likely that one company would go bust, at least one would be a huge home run and the rest would be a little ahead or a little behind the market but again, provide a reasonable chance of having enough even if the ten did not beat any index.
The reader question that prompted the post said winning with stocks was very difficult to which I replied that it depends on how you define winning. A reasonable definition of winning is having enough when you need it and that was what yesterday's post tried to explore.
I should also again point out this is not a recommendation for a strategy. It is an attempt to demystify the use of individual stocks.
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