Investment Principle #7: Don’t Try To Pick Individual Stocks

Find out why we should take a wider view of the global stock market and realise that investing in a single company is much riskier than investing in the whole market.
26 June 2020
Investment Principle #7: Don't Try To Pick Individual Stocks

Find out why investing in a single company is much riskier than investing in the whole market.

Most of us would have witnessed the stunning spectacle of multicultural dance performances at our National Day Parade and been amazed at the fascinating displays of human synchrony.  Some of us may even recall participating in the marching parades or being part of the squad that flipped flashcards from the stands during our youth.

Although everything seems to move perfectly in sync from afar, if you were to focus on a single person, things get much more random. The person might go left when the group goes right, or perhaps he or she might lag or fumble. I’m sure you’d agree it is much more enjoyable to watch the performances in its entirety rather than to focus on a single person.

Investing is the same. Just as how one performer could miss a beat, individual companies could move in a different direction from the market. Perhaps the company has been suffering from poor management decisions or has recently launched a product line that is not doing so well. Therefore, investing in a single company is much riskier than investing in the whole market. Research has also shown it is very difficult to pick stocks that will do better than the market consistently.

However, when we take a wider view of the global stock market, over time we notice a distinct and predictable pattern: The stock market always goes up! So do not attempt to pick individual stocks. Broaden your selection to look at the entire universe of stocks so that you can enjoy the performance rather than fret over any individual performer.

This series is adapted from the book, 27 Principles Every Investor Should Know, written by Steven J. Atkinson. Read the rest of the principles:

Share this

More Articles From MoneyOwl

Stay informed on our latest updates and happenings.

Instead of saving your child's hong bao money in the bank, why not help them invest their funds? We share how you can give your child a financial headstart in life.
30 Jan 2023

Financial Planning

Our CEO and Chief Investment Officer, Chuin Ting Weber, reflects on 2022’s market challenges and shares how consistency is key to portfolio resilience, and growth in the long run.
20 Jan 2023

CIO Letter

Spring cleaning your finances can make all the difference to your financial health. Here are our top 8 tips to help you get started.
13 Jan 2023

Financial Literacy