It‘s just a few % that make up the total value, but that doesn‘t mean small caps don‘t outperform large caps for example. It‘s just that the total value of return is lower. The relative % can be the same or higher.
If MSFT for example outperforms, it‘s a huge % of the total performance of the market, because MSFT is just so big.
But if a small cap with 1B in mcw makes a 100% in a year, it‘s a tiny blip in the market cap weighted index.
I am a bit curious now what is the real chance based on math.
If N stocks exist, let’s say S&P 500… and let’s say there are 100 investors , each can pick max of 10 stocks. What is their chance of beating the average S&P 500 performance? Assuming TER is Zero as we are talking about retail folks.
I found something … worth a read. Doesn’t answer the question yet
Well, it also depends on the goal. My goal is currently to grow wealth by saving and investing, and my thinking is geared towards this goal. A significant majority of forum members are in this situation.
And I think that passive index is the best way for it.
For someone who has 5+ millions portfolio and wants to live from it, the situation might be very different. I will totally understand if this person creates a hand picked portfolio of superboring utilities, cantonal banks, insurances and consumer staples. Take stocks that produce regular and steady income, which are long time in their businesses and don’t hurry to grow at any price. There is a huge chance that this portfolio will underperform the index, but who cares?
If you have won in the game, stop playing.
Another extreme would be someone taking more risk to become rich faster. Can’t recommend it. We always hear about people making crazy money with crazy bets, but it’s because it is rather a very seldom exception. Unless you have a specific point, it is not very sexy to make stories about people who ruined themselves by taking risks.
P.S. Sorry, it came out longer than I thought 
.
Hahaha, you also have just did it 
. Anyone wants to tell about a friend who has lost lifetime savings in day trading? I wonder why these people never talk about it 
?
P.S. I did lose 10+k in trading in the past. No strategy, too much leverage, …, total loss!
I know someone who did the same. Life savings in a company that did outrageously well, coudn’t stop talking about it, wouldn’t diversity. The company was a supplier to Apple who later dropped them and then company tanked. The guy lost everything. It affected him badly and he became depressed.
In my active investment days, I bought NVDA at 500 USD (before split), it went up 15% in 1-2 weeks. I thought this is too much and I decided to book profits. I guess I don’t have to tell you how good this trade was (or was not) …. That was the period when I understood that it’s not my forte to pick stocks
Eh oh well, you’re still a winner. Even 0.01 CHF is a win.
I put 2000 in nVidia and Lilly in Feb’23 and sold in Dec '23. It fully funded a family holiday in Paris and made a point to my spouse that “looking at numbers” (as she calls it) is meaningful.
Not a stock picker either, just BRK.B, and definitely not active but buy and hold. As Dr Pi said above, one can achieve a lot with little effort. In fact since end of 2023 (I am only into this since 2022) all my “looking at numbers” is purely for fun’s sake. For example I’ve projected how dividends from VWRL will go from covering my account and trading costs, to buying more BRK.B, to funding a few months’ rent per year, to eventually being part of my retirement income, hopefully without ever needing to go to high-yield ETFs.
Pretty cheap lesson!
We just don’t earn that much. Among the members of this forum, out income is pretty low 
.
We have good, convenient and fulfilling jobs and are not in a hurry to quit.
I am not pushing myself and my family to save more for the sake of maybe early retirement now when children are in the best age to discover the world with us.
As you probably have guessed from my previous messages, I don’t want to take more risk than necessary. We have our portfolio, our assets allocation and are riding the market.
I can outwait many things while working and saving, but I am very cautious in starting an early retirement. To do this, we should be in a very comfortable situation.
Currently I have converged to 2M CHF in today’s value as a target for the portfolio size that should complement our pension income after a regular retirement, plus minus few years. We should reach it by the retirement age.
I would start to think about some type of early retirement if we would have 5M CHF in today’s value. But even in this case we wouldn’t be in a hurry, I guess. I find there are not so many fun things that you can do while children go to school.