Picking individual stocks is a losing strategy. The market is buoyed mostly by "superstocks." Even if you pick your 20 favorites, if you don't guess correctly and include that decade's "supers" you'll lag the index. If you didn't guess Dell Computer in the 90s (up 55,000%) or stuff like Invisalign or Walgreens this decade, you missed out on a lot of returns that were captured with whole market indexes. Don’t bother with dividends. There’s a lot of focus on stocks that pay out 4 or 5% in cash a year and the desire to dump $1m into them and collect $50k a year in cash and never sell anything, but the way US tax code works, selling stocks for capital gains after 1 year of holding is identical to collecting qualified dividends, so you should only look at total returns and ignore dividends by themselves. Algorithmic trading and Excel schemes won't work. On Quantopian.com you can design complex trading schemes and backtest them against a hundred years of stock data to see if your algorithm should beat the market and then they’ll give the best backtested algorithm access to $100k for the entire next month and let them have the profits. In that month, just as many lag the index as beat it because people are working on Wall Street and making millions a year to design the same algorithms, and it’s a zero-sum game. Active management is a scam. There are tons of articles roasting stock pickers for claiming they can guess which stocks will outperform the index. Some do, but most don’t, and there’s no way to differentiate who can pick winners from who can’t. Check out Warren Buffet’s bet with the hedge fund guys that he won. Further, actively managed funds have much higher fees, which even fractions of a percent will erode your earnings a great deal over decades.
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