Why I Don't Like Individual Stocks

I don’t like individual stocks.

I don’t like talking about them, I don’t like looking at balance sheets and income statements, I can’t stand listening to or reading quarterly reports, and I especially don’t like it when they cause my clients fear or fear of missing out.

The longer you own an individual stock, the more likely it disappears. The longer you own an index, the more likely your money multiplies.

At its peak in 2000, Nortel made up over 30% of the TSX. Canadians flooded into it, convinced it was a can't-miss investment. Pension funds, retail investors, and institutions all loaded up. If you didn’t own Nortel, you looked dumb.

Less than a decade later, it was worthless.

Even before Nortel was removed from the index in 2009, it had already lost nearly everything. And yet, despite the collapse of its biggest stock, the TSX kept growing. The index doesn’t rely on any one company - it evolves, replacing its losers with winners over time.*

The TSX Composite Index has grown at an annualized rate of over 8%, proving that diversification isn’t just about returns; it’s about survival. .

A stock can go to zero. The market never has.

For those of you who remain steadfast in owning individual stocks, please make sure you own enough of them to be appropriately diversified.

*There are countless examples of this when it comes to the S&P 500 and Dow Jones Industrial Average too. Kodak, Xerox, and Enron immediately come to mind.