Interesting question came my way from reader Scott:
….But Tim, wouldn’t most investors be better off simply owning index funds instead of trying to pick successful companies themselves?
Scott, I like that question because it cuts to the premise of the site—I write articles for everyday investors, and it is fair to wonder whether it’s all a waste of time and whether low-cost index funds should be pursued.
First of all, I’d like to start by observing the great overlap that exists between the two strategies. If you look at an S&P 500 Index Fund, what are going to be some of the large holdings? ExxonMobil, General Electric, Procter & Gamble, and Johnson & Johnson.
What are the stocks I talk about buying individually? ExxonMobil, General Electric, Procter & Gamble, and Johnson & Johnson. There is a huge overlap between the companies I mention approvingly here, and the companies that … Read the rest of this article!