Why Stock Picking Fails - And Why SPY Or VTI Is All You Need | Seeking Alpha
This article does a great job of reiterating an important point that often goes unsaid: over the long term, a plain and boring investment strategy can yield better gains, even if you don’t have the bragging rights for timing investments like NVIDIA perfectly. Many who boast about their timing often fail to recognize how much they miss out on by selling too early or waiting on the sidelines for a market correction. It’s essential to understand that time in the market is more important than timing the market.
Additionally, if you overthink before invest in each company, you may end up holding onto cash for too long, worrying about not having enough good opportunities. Consequently, any successful investment you make won’t move the needle for your overall financial situation. On the other hand, if you invest all your money in VTI, you are likely to see significant gains over the years with the funds remaining invested during that time.
When it comes time to sell and raise cash for something like a down payment, you can simply trim a portion of your ETF. There is no need to worry about which specific company to sell.
The author suggests that SPY (the S&P 500 ETF) is better than VTI (which represents all 3,700 US-listed stocks). I disagree. While SPY is very liquid and caters to traders, it typically comes with much higher fees. If I were to recommend an ETF for long-term investors, it would be VOO (Vanguard S&P 500 ETF). The impressive performance over the past decade that the author mentions is largely due to tech stocks significantly outperforming other sectors, but this trend may not persist over the next 50 years. The next high-growth sector could be genetics, pharmaceuticals, or something entirely different. There are too many variables to account for, which is precisely why it’s wise to stick to simple, boring index funds—either VOO or VTI.
Honestly, just get invested already! The time you spend deciding between these two options could be better spent enjoying quality time with your kids. Isn’t that the point of being a hands-off investor? The long-term difference between VOO and VTI is minimal, so stop obsessing over it. Why not buy both?
We also need to consider diversification outside the U.S., which is not discussed in the article. The U.S. has experienced a decade or two of significant growth, while the rest of the world has lagged. Historically, before this period, ex-U.S. stocks have performed relatively well. Therefore, allocating 20 to 40 percent of your assets to VXUS makes sense. VXUS provides a cost-effective, hands-off basket of international stocks.