r/investing
Why do you invest in stocks?
A medical resident asks if learning fundamental analysis is worthwhile given the difficulty of beating index funds like VOO.
- Strong conviction in passive index investing based on historical outperformance over active managers.
- Consistent long-term investment plan with high monthly contributions to VOO.
- Skeptical about the value of fundamental analysis and active stock picking due to market efficiency.
- Views active stock picking as potentially no better than gambling with little actual return.
Made a post yesterday but need to add clarification. I'm in medicine (anesthesia) with 2 years left in training. and then will be a full physician. Since college, I have been investing in VOO only. My plan will be to pay off loans ASAP dedicate 4-5k a month to VOO until retirement.
The reason for this post is i've always loved the idea of stocks and looking at fundamentals to try to find upcoming companies. I did an MBA and loved this portion of my finance/accounting class. My portfolio only has VOO but I would love to add growth/value stocks in the future.
What deters me are the classic stats of no one beats the index funds and the monkey experiment where they went head to head with wall street investors. My initial plan was to invest mostly in VOO 90% with 10% in stocks with the understanding that I could not make anything in that 10%.
Is fundamental analysis and learning more about valuation even a worthwhile skill or am I no better than a monkey lol? I love the idea and want to actually read books and learn more about it; but at the same time if its no better than gambling at the casino, it might not be worth it. I just do not want to spend hours on a skill that has little to no actual return.
Reading about stock analysis is definitely a worthwhile skill even if you stick with VOO. You might not beat the index but understanding why businesses succeed or fail is useful for way more than just picking stocks.
The average person doesnt beat index funds, but since when do doctors limit themselves to what the average person is capable of? Although maybe thats partially why there are so many shitty investors who have MDs
It’s about how much is that time of learning worth. Look if your craft isn’t related to this…yea you can spend the time to learn it. Maybe not fundamentals valuation but maybe portfolio construction, theory, and risks…but how much is an hour worth? How much is the opportunity cost? Sounds like the opportunity cost for you is much higher than most of the people here.
So is trying to figure this out the best cost adjusted use of your time?
I find it extremely useful to invest in individual stocks even if a majority of my wealth is in index funds. VOO is NOT a magic “10% a year” technology. It is a portfolio of stocks. The composition of the S&P 500 will change. Sometimes, yes, bonds will be more attractive than stocks (heresy!). It’s hard to know these things unless you’re tinkering with a small fraction of your portfolio. You will learn a lot.
No, you'd just be wasting your time which I assume you don't have a lot of as a Physician.
People can and do beat the S&P. Over long periods of time even. Warren Buffet, Peter Lynch, Willian Danoff, etc.
But, it's rare, and takes a lot of time and effort.
It's not true that no one beats the indexes. Look at Warren Buffett. He does it by valuations. Yes, fundamental analysis can help you determine which stocks are undervalued... And are therefore more likely to outperform the market. I use Benjamin Graham's revised formula for valuations. Just beating the S&P by a coupke % makes a huge difference. I do something similar to what you are proposing, hold the s&p and add a little extra in cagr when the companies are compelling using individual stocks and options when it's ultra compelling.
No matter how many times Reddit says it, Warren Buffett was not a stock investor for the vast majority of his life. He bought controlling stakes in companies, changed management, making the companies more profitable.
One of their hallmarks is NOT changing management actually. It has happened but not their strategy
Most people fail to do it =/= it's impossible to do it. Astrologists can't predict shit, because their premise is nonsense. Renaissance Technologies made a killing with quantitative trading.
Of course if you learn from common people with fancy degrees but that can't consistently beat the market, what you learn is useless.
Beating the market is math and computers and a lot of sweat and secrets, and even then you'll likely fail. 99.9% of so called professional investors and managers don't even know enough math and programming as to compete.
My portfolio only has VOO but I would love to add growth/value stocks in the future.
What deters me are the classic stats of no one beats the index funds
So keep doing index funds. Use VTI instead of VOO to add small/mid cap and VXUS for international. Or keep VOO and add VT for everything in 1 fund. The VOO you have will just mean you're slightly overweight on Large Cap but that's not a big deal.
I do my own valuations, and I was (slightly) beating the S&P 500 (for decades), until I got blindsided by "liberation day", aka. the tariff party. IMO, the real benefit has been knowing how/why I value a stock. My valuation model prevents me from panic selling based on ephemeral trends.
You have a very lucrative career, VOO and max is plenty and I’m sure you’re busy. I grabbed individual stocks along the way because I had to, you don’t.
I have a few stocks in company's that I like. Its kind of activist investing. Otherwise, I invest in ETFs.