Even if you have a good year or two, it is less likely that you’ll replicate that over the long term.
Still, you can’t beat the market with market-matching index funds, and there have certainly been successful investors who have developed winning strategies.
Unexpected bad news for any single stock will have a much more pronounced impact on your overall performance.
If you have enough cash in other, less volatile assets, you won’t have to worry about short-term stock market swoons, and you won’t be forced to sell stocks at inopportune times.
Once you have a well-defined approach, make sure you’re confident in your ability to analyze stocks and identify the best ones.
These ratios and statistics provide essential information related to valuation, profitability, growth, financial health, and operating efficiency.
You can also choose to monitor macroeconomic and market-wide news to help you understand which forces are influencing investment returns beyond the performance of any one company.
If your schedule is too full of professional, family, or social obligations to regularly monitor the performance of a handful of stocks, then you might want to keep it simple with indexing and ETFs.