Here’s my rule for picking stock “winners”:
Don’t listen to anyone who says they can identify the next Facebook.
The odds are stacked against you.
Over the long term, a relatively small percentage of stocks (around 20%) account for almost all gains in the domestic market.
You have about a 40% chance of picking a “loser.”
The chance of a “big score” is about the same as the possibility of a huge loss.
There’s a better way.
Buy a low-cost index fund that tracks the S&P 500 index or the Russell 3000 index.
Historical annualized returns for these funds are around 10%.
That’s a “winning” strategy.
The next time your broker recommends you buy an individual stock, just say this:
I follow Solin’s Rule. I don’t want to try.