Why You Should Pick Stocks Instead Of Trusting Index Funds With Your Money

Most people invest in index funds. But even with a good investment idea, it's risky to follow the crowd in investing...

How most people invest
The accepted, best-practice is to simply send your money to a large index fund such as Vanguard's S&P 500 tracker. This has several big advantages. You don't have to think about it. You get a good amount of diversification - your money gets invested in 500 companies. You get generally good quality companies. The S&P 500 is made up of America's leading 500 companies.
So, index investment can be the right option for many people. And indeed, this is by far the most popular way to invest.

However, there is a massive downside.

Never follow the crowd
You know the old saying: "Go where the traffic isn't". Which brings us to the problem with index investing: everybody's been doing index investment on autopilot for years. Not many have dared question the wisdom of doing this. And as money flooded into these 500 index companies, their stock prices have soared. To be fair, membership in the 500-club changes every quarter. But most of the companies on the list stay there for a long time.

Now, I'm not saying it's a bubble... but it's starting to look a little risky. The Schiller PE ratio aims to measure how expensive the S&P 500 really is for what you get. It has been trending up for years.

Nobody knows the future - for all I know, the S&P will keep rocketing up forever. But I need a little more financial peace of mind than that.

I need to know that my money is invested optimally

What if there are great companies that haven't made it into the S&P500 yet? They'd tend to be undervalued, because of all the investor dollars going into the S&P500 on auto-pilot. What if there were weak companies within the S&P500? They'd tend to be overvalued for the same reason.

That is why you need to know the financial performance of every company, and why you also need to know which of those are being offered for sale at a bargain price by the market.

But that's impossible!

It sure is impossible, which is why I built ultimatestockpicker.com to do it for me. Sign up right now to have all of this information at your fingertips - for free.

Happy investing!

Fred