Picking stocks that is. After years of preaching the importance of passive index investing to others, I have decided to stop actively picking stocks. Yep, I've been living a contradiction and I'm finally ready to pull the plug on a bad habit.
How I got here
"A little knowledge is a dangerous thing." - Alexander Pope
I'm a relative late comer to investing. I began investing in stocks in 2010. By virtue of good luck and even better timing, I made pretty decent gains with my investments. Unfortunately, like so many others skilled in self-delusion, I decided to credit myself for that success. Sure I was reading The Fool, Bloomberg, Seeking Alpha and following business news every day, but the fact remained that I was a medical student sitting in my 2-bedroom apartment in Columbia, MO who was cocky enough to think I could outsmart Wall Street.
When I graduated medical school in 2013, I decided to cash out my investments and put the money toward paying down student debt - a decision I still regret deeply to this day. However, after I started receiving my meager resident paycheck, I became nostalgic toward my investing days. To be fair, it would be very difficult to not be nostalgic toward a 3-year period where you doubled your money by sitting in front of a computer a couple of hours a day. So I started building my portfolio back up just a few months after cashing it all out. I kind of felt like this guy...
As you can imagine, the life of an internal medicine intern was not very conducive to spending hours per day digesting business and investing news. So I began investing in ETFs and other passive indexed investments. But I still picked stocks every now and then - albeit my picks were based less and less on actual knowledge of the business in question. That's the story of how I got to my current system for the last 2 years of basically a 50-50 active-passive investing strategy (see Investing for Retirement - The Future Proof Way).
What does "here" look like?
I'm going to let the chart above do the talking. But the short version is - I've been lagging 10.5% behind the S&P 500 for the last year. Maybe I'm not the next Warren Buffett after all...
Why I'm Pulling the plug
Here are the reasons why I enjoyed picking stocks that no longer hold true:
- It was a lot of fun - but it's easy to have fun when you're making money. Let me be frank - this last year has been a lot less fun than the previous 3.
- It made for good conversation - I enjoy nerding out on investments as much as the next investing junkie. Unfortunately, to carry on a good conversation you need to actually be aware of the latest business and investing news, which leads to the next point.
- I had free time - it's not that I don't have free time now. But I definitely have less of it than I did in medical school. And what free time I do have, I would much rather use it doing other things: learning radiology, doing research, writing on Future Proof, MD and hitting the gym more often just to name a few.
Effective immediately, I will be liquidating my individual stock positions and converting them into passive index investments. I anticipate this to take a little time but should be completed within the month.