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Hot Stocks (Not) To Pick

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This NY Times article Hot Stocks Can Make You Rich. But They Probably Won’t provides a succinct take on the odds of picking the next big winner. Before you jump headlong into stock picking, you should consider the odds. Over the long run, while the total stock market has prospered, most individual stocks have not.

“A new study by Hendrik Bessembinder, a finance professor at Arizona State University, demonstrates persuasively that while investing in the overall stock market makes sense, the obstacles facing individual stock pickers are formidable.

Professor Bessembinder found that a mere 4 percent of the stocks in the entire market — headed by Exxon Mobil and followed by Apple, General Electric, Microsoft and IBM — accounted for all of the net market returns from 1926 through 2015. By contrast, the most common single result for an individual stock over that period was a return of nearly negative 100 percent — almost a total loss.”

Yet more evidence that stock picking can be very harmful to your health. Diversify, diversify, diversify.


To Your Prosperity,
Kevin Kroskey, CFP®, MBA

A version of this article appears in print on May 14, 2017, on Page BU6 of the New York edition with the headline: Hot Stocks Can Make You Rich. Don’t Count on It. 

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