Why Stock Picking is a Losing Strategy
Chance instead of talent
Prof. Weber explains that the success of shares is only ever apparent in hindsight and that many studies prove that stock picking does not bring higher returns in the long term. Even legendary investors such as Warren Buffett are not sure winners in the long term. Weber sees the success of many fund managers as a coincidence, not a talent. The capital market is so efficient today that professionals react to new information almost in real time, while private investors often lag behind.
Market timing does not work
One of the biggest challenges for investors is market timing – trying to find the perfect time to buy or sell shares. Weber warns against this strategy: Nobody can predict when the market will rise or fall. An example from his own experience showed how his friend tried to wait for prices to fall during the 2008 financial crisis – which turned out to be a mistake, as prices quickly rose again.
Better strategy: diversification and patience
Prof. Weber's recommendation for investors is a broadly diversified investment strategy – around 60 percent equities and 40 percent bonds. He also advises against special dividend strategies and recommends broader index funds that are weighted according to gross domestic product.
Patience pays off
In conclusion, Weber emphasized that long-term patience and a diversified investment strategy are the most promising. Despite fluctuations, the stock market rises by an average of seven percent per year in the long term.