Why sometimes diversification is not the key to your success

1Semana

@GoDividend You can see it either way, I've built up enough knowledge this year :)

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Sansebastian@Sansebastian

1Semana

@GoDividend Do you feel offended because you have 5000 ETFs? If you're doing well with them, why not?

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1Semana

@spadan21 You can never build up enough knowledge, especially not after a year

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Tobi60@Tobi60

1Semana

And what would you have done with your tech stocks in 2022? Sold or held ?

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1Semana

@Tobi60 nachgekauft

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Sansebastian@Sansebastian

1Semana

@Sansebastian enough knowledge to write a post that reflects my opinion :)

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1Semana

@spadan21 Yes, that's another story. But you never stop learning on the stock market.

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hcs@hcs

1Semana

@spadan21 To front against others because they have an Etf strategy and can't stand being criticized themselves, that's exactly my sense of humour. I think everyone has understood by now what a crass fish you are, swimming against the tide, that's enough now.

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1Semana

@hcs So people fronting means when I put facts on the table that the EMI IMI ETF sucks?
Welcome to 2025😂

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1Semana

@hcs I have a World ETF myself, you bird😂✌🏻

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Homer@Simpson

1Semana

Faith is something you do in church, not on the stock market 😊

On the stock market, I always know that I know nothing😂

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1Semana

@Simpson Facts😂

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Rudi@Rudi001

1Semana

If I were Warren Buffet, I would bet 1 million euros that an S&P 500 ETF will outperform you over the next 10 years

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1Semana

@Rudi001 I am very heavily invested in Nvidia, which, if you have seen, is a large part of the S&P 500

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1Semana

Etfs are not just diversification. I think you still have something to learn.

Etfs replicate an index. An index that, at least if you start with the big ones, is diversified but also statistically proven to have a positive return expectation for long-term investing. An index, which means that the ETF adapts to world events. Automatically. Winners in, losers out.

In my opinion, you don't have this positive return expectation with individual shares. A company can be doing great, but three news items later the share price is down. If you wait forever, they may go bust.

Personally: If you are good at stock picking and have an exit strategy, you can certainly beat the market. A lot of fund managers try every day and don't succeed. But you have certainly found the holy grail :)

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1Semana

@Madhatter5566 I personally know many people who have successfully beaten the market, it's not rocket science. But keep your hands off it, if you think so small, it's not for you anyway

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1Semana

@spadan21 How often? Permanently? Then everyone would pounce on your stock.
I think that's a rumor.

You can always outperform the market in the short term. But 5 individual stocks are the ones that will scream how stupid everything is in the next crash.

I don't think small. I don't invest everything in ETFs either, but am actually more of a gold bug. I'm just not interested in outperforming, I want it to have little DD and so on.

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@Madhatter5566 Why do people only talk about funds, they have completely different investment volumes regulations and have to justify themselves, the fund manager would certainly invest differently in his private portfolio, just because fund managers do not beat the market does not mean much for private investors

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@Wravo So in your opinion, a fund manager does not aim to beat the market? Then why is he there at all if he could simply put the money from the fund into the world?

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@Madhatter5566 Of course he tries to beat the market, but he has significantly worse preconditions than if he were to invest privately, due to the higher capital he cannot invest in smaller stocks, Warren Buffet also had significantly better returns with less capital, he has to explain every loss and therefore usually trades more, plus he has to recoup the costs. As I said, logically 50% of the active capital must overperform otherwise the math makes no sense

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@Wravo What you are saying is absurd. The fund managers can't even keep up with the market. Although there is a huge position in global equities. Contrary to his strategy, he would at least keep up with the market.

And the OP only wants to beat the entire market with 5 large stocks. But fund manager XYZ can't do that with 5 stocks? What?

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@Madhatter5566 if they bought a global fund nobody would buy the fund and you always have to factor in the costs of the fund manager and I'm not saying his strategy makes sense, but the fact that you can't outperform the market because the fund managers can't is nonsense, I think 10-15 well diversified stocks make more sense. Problems with fund managers, there are fewer good investment opportunities in stocks with high market capitalization and a fund manager cannot sit out losses for long because he has to justify himself and that quarterly in addition there are fund managers who outperform the market, but the fund does not because the costs go away

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@Wravo So let's make a statement: fund managers are pointless because they invest in things that underperform the market in order to justify their existence.
But you are clever enough to know how to invest in shares that are also open to fund managers in such a way that the market is beaten.

You completely ignore risk and such. If you were to take this into account, you would see that a fund manager promises not to go completely out of business even in the event of a crash and therefore usually builds up and hedges more broadly. The idea of buying 5 shares, which a fund manager could also do, is complete madness in terms of risk management and has nothing to do with "market hurdles" caused by too much money. It has to do with the realization that it is madness and is not a safe investment in the long term. But I'm sure you'll learn

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@Madhatter5566 You said yourself above that fund managers usually underperform the market, yes it makes no sense to invest in an active fund, as I said I think the 5 stock strategy is far too little diversified and no most funds can't invest in the stocks I am currently invested in and yes my portfolio is more volatile, what I wanted to say is I can hold a stock that goes down 50 the fund manager usually can't

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@Wravo Yes. For the reason I mentioned. In my opinion, a world is already diversified enough and you can do without funds. More is too much of a good thing and brings losses in returns. Which you can also see.

The opinion that you can beat the market in the long term with 5 stocks like spandam is again the other side of the coin and again too little of a good thing. At best, you will beat the market in the short term and probably not in the long term.

What is the point of holding a share that falls by 50 euros? How do you beat the market with falling shares? Or do you mean that in one year you don't beat the market by minus 99%, but then in the following years you are above 8% with the penny stocks because they catch up a bit? Also a strategy

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Mo@BigMo

1Semana

"Believing incredibly strongly" is not the same as knowing.
Of course, from your perspective, there's nothing wrong with picking stocks with an asymmetric risk/reward ratio.
But if you base your overall portfolio on a handful of individual stocks, you implicitly assume that you know better than the market.

It is precisely this risk that you avoid through diversification.
Although you forgo the maximum possible return, you also significantly reduce the risk of a total loss.

A core-satellite strategy, in which the core consists of broadly diversified ETFs, allows you to selectively overweight individual securities - without putting your entire assets at risk.

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1Semana

@BigMo And if I expose myself to this risk and firmly believe in it, I am more willing to hold this share for +10 years. It also opens the door to the possibility of beating the market. I keep all doors open and am not satisfied with a 5% p.a. return.

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Mo@BigMo

1Semana

@spadan21 You can also beat the market if you invest 80% in ETFs and take 20% risk.
There are countless examples of large, supposedly safe companies that have underperformed the market (S&P 500, for example) for 10 years.
Everyone wants high returns. As quickly as possible. It just doesn't always work out as easily as you hope 😀

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1Semana

@BigMo For me, my 5 companies are not a risk, they are no-brainers. But you're definitely right. With 80% ETFs and 20% shares, it's also working out great. I just wanted to have a certain number of shares and now the position clearly outweighs my portfolio share😂

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Oleg@ScorpionfromBW

1Semana

Let everyone do what they want. Play your game, but don't try to influence the others.

You probably won't find out who was smarter in the end anyway.

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1Semana

@ScorpionfromBW My message was: "Everyone should go their own way"
I don't know what you mean by influence.

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Oleg@ScorpionfromBW

1Semana

@spadan21 nothing, forget it

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1Semana

@ScorpionfromBW Everyone influences you every day. Everything you see on your social media. Your comment is pointless.

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Dirk aus Stade@dirko68

Self-confidence and stupidity go hand in hand. Be careful what you do. It can also backfire.

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@dirko68 I'm self-confident, not so much stupid, but you seem to be an expert.

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tommycashless@tommycash

1Semana

I begrudge you early retirement just as much as a wake-up call - only the crystal ball knows what will happen 🤝😁

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1Semana

@tommycash I don't really care what happens. I'm in my early 20s and ready to fall flat on my face if I have to. I have 40 years and my World ETF runs passively on the side😂

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Mav83!@Maverick4831

1Semana

Just reading this "scrutinized"... auto indicator for people who think they know "better". Got the tech giants and Hims-Fomo and think you've dribbled the market🥱

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1Semana

@Maverick4831 Don't put me directly in a drawer😴
Hims Fomo and been in since €19 share price?
Sounds more like you missed the entry😂

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financer_2339@financer_2339

1Semana

@Maverick4831 -70% in portfolio performance and you talk about dribbling the market😂

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1Semana

I haven't been around long, but 20% of your 5 companies are in the S&P 500, so you might as well buy an S&P 500 ETF and in the long run you'll probably do similarly.

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financer_2339@financer_2339

1Semana

@financer_2339 Yes, you're right, except that the return would be lower

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1Semana

@spadan21 No, it's hard to believe that your 5 companies will always be successful for the next 30-40 years. An S&P 500 ETF would then kick them out and take in the new winners, which pretty much guarantees you a profit.

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1Semana

@financer_2339 I think Spandan thinks an ETF is a snapshot, the snapshot remains. ETFs are more like diversification. You have to learn that this exchange, winners in, losers out, is almost unbeatable in the long term if it happens automatically and unemotionally.

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1Semana

@Madhatter5566 think bigger, but of course I could be wrong, but it wouldn't be a disaster.

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1Semana

@spadan21 No, you think you can beat the market forever with 5 shares. Which is fatal if you think more than 3 meters wrong

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@Madhatter5566 what to beat forever😂 I don't even live forever. Maybe I'm just young and have a lot of time😂

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@spadan21 I'm already referring to the misconception that you can do this for several years in a row

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@Madhatter5566 In any case, it is possible and I want the best rausholen🙏🏻

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@spadan21 Oh, certainly. Once, twice. That works especially well when there's no crash. That's when you learn.

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@Madhatter5566 I get in where the crash is.

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Leo@MCKrummel-Divi-Holding

1Semana

Then show us your 5 companies!

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Ronald@AlterMann

1Semana

The summer slump already at the end of May... I think there's been enough attention here for nothing now

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Dominik@Dominik_76

1Semana

There is hardly any asset class or sector that has performed very well over the long term. 10 years of underperformance does not mean that it will always stay that way. Nobody knows that either. It's a bet where you take the blue chips because they won't fall over. There are so many random events in the stock market that you can't know what will happen in the future. If you still have a life besides money, greed and fear and don't want to constantly follow share prices, then let it run broadly diversified. Then you'll get more out of life. It doesn't make me happy to be constantly glued to the app and tracking share prices.

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Jan H.@J4nh44g

Don't you want to share your returns? If you say something like that, you shouldn't have a problem with a public profile. Makes me wonder

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Finanzaristokrat@Finanzaristokrat

Do what YOU want and what makes YOU happy. Period

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Sebastian W.@Sebastian2000

An ETF effectively tracks the market and does NOT aim to outperform it. The aim of an ETF is to capture the market return at low cost. And statistically it has been proven that it is better than stock picking in over 80% of cases. You are right that an ETF will probably not outperform the market, but otherwise you are unfortunately not very right.

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Peter@investingbeginner

Yes i also think you can beat the market, i haven't finished one full year, i started in july last year. But so far my TTWROR is 62% and my YTD return is 34%, so you can beat the market lol, but needs conviction and to hold in crashes and not panic

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Jens@flush_hatch

Who is this guy??

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Metis@Metis

1Semana

Can we talk about this again in 10 years? 🤓

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Karsten@Karsten_

1Semana

Freely adapted from Albert Einstein:

Forecasts are a difficult thing, especially when they concern the future ....

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Paketknecht@Paketknecht

1Semana

Yes, the EM IMI has performed poorly in recent years, but it is often the case on the stock market that good years follow bad years and good years follow bad years. This is called regression to the mean.

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$ J.@1000000

1Semana

Diversification is the key to not - not success :-)

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Marco@Investplaner

1Semana

I also believe that a market ETF does not outperform the market :)

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S.A.T.@SATNL

Well do you have to beat the market ? If you make more profit than parking the money in a saving account is that not already a win?

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Joshua@WarrenNakamoto

This makes me think of Michael Saylor and his one chair argument. https://www.youtube.com/watch?v=qjjNgW4bZm8

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Aktienfreund@Aktienfreund

There is still a lack of humility on the stock market. It will come ;)

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Stephan K.@StrahlemannLP

This may be true in some respects, but the question is always what kind of horizon you want to have: because the idea that "I'll get all the information I need and then it will work out because the figures are right!" can also be wrong, and there are many examples of this on the stock market: Wirecard is just one of them.

So you have to ask yourself what you are more likely to be satisfied with: Even with a "meagre" 6 to 12% return, you can generate a certain amount of wealth if you stick with it. And constancy certainly beats the market, although you should of course always check what you are investing in.

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Thesaurus@Thesaurus

The probability is scientifically quite low that you will outperform the market with stock picking, but I wish you good luck anyway

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