If you are wondering how to pick the right stock, you are looking at wrong places. There is no single magic stock that will make you rich, no one can guess that.
I keep repeating that you cannot predict the market and that you are better off investing in an index fund rather than trying to beat the market and this article from The Guardian is simply the single best way to prove my point.
Stocks go up and down and even the professionals cannot figure it out. In this British study, wealth managers, stock brokers, finance students, and a cat were given £5,000 to trade 5 stocks and competed for a whole year.
Just let the pros at it
Every three months, they could change their portfolio and could exchange any stocks, replacing them with others from the FTSE All-Share index (a London Stock Exchange index comprising around 1000 of more than 2,000 companies).
While the professionals used their decades of investment knowledge and traditional stock-picking methods, the cat selected stocks by throwing his favourite toy mouse on a grid of numbers allocated to different companies. – Mark King
By the end of September the professionals had generated £497 of profit compared with £292 managed by Orlando. But an unexpected turnaround in the final quarter has resulted in the cat’s portfolio increasing by an average of 4.2% to end the year at £5,542.60, compared with the professionals’ £5,176.60. – Mark King
This cat returned a 10.08% return over the year compared to the professionals’ 3.53% return. As a benchmark, the year of the study (2012), the FTSE All-Share index returned 12.32% once dividends were included (total return).
So, how should you invest?
Instead of opening a trading account for my cat, I prefer investing in a diversified, properly allocated, index fund portfolio and let my cat play in the yard. 🙂 Index fund investing is the ideal way to start investing and it leaves luck and gambling for the “pros”.
To start your own asset allocation and start trading, you can open a brokerage account with Ally or open a Vanguard account to invest in their ETFs for free. We also really like Wealthsimple given their low fee financial advice and robo-investing options. They offer qualified financial planners t help you reach your goals without paying huge fees.
If all of this sounds too complicated, we suggest Wealthsimple.
Start your automatic investment account today!
Just enjoy your free time
Now that you are not always looking out for the next big stock, what should you do with all your free time?
Consumerism is a norm in America and most people go to the mall because… why not? The Motley Fool reported that the typical woman makes 301 trips to the store annually, spending close to 400 hours a year buying clothes, books, food, and toiletries. This is a LOT of hours! But does shopping actually make you happier?
Simply by looking at the increasing average credit card debt, one can quickly see how this is not sustainable. From solely a monetary point of view, the average shopper is taking out credit card debt (usually around 20% interest) to buy stuff. Lots of stuff.
Is shopping the answer?
Not only can shopping be bad for your wallet but all this stuff needs to be produced (mostly in China) by low-wage workers with bad working conditions, shipped around the world, staged on a shelf in a big mall that needs to be heated, driven to, and takes up a bunch of space. Shopping is not a very environmentally healthy habit either.
A recent survey from Ebates found that among 1,084 adults ages 18 and older and 501 teens ages 13-16, 96% of adults and 95% of teens replied that retail therapy was good for the soul. I found this article interesting but of course, it has to be taken with a grain of salt. After all, it was written by an online retail company.
More than one-third of American adults say that shopping makes them feel better than eating pizza, followed by working out (36%) and ice cream or other sweets (34%) – Ebates
What to do instead of shopping?
In the American culture, shopping has become a hobby or something we do just because we are bored. I think that there are much better things you could do with your time. Instead of spending money, you can find a ton of free activities or you might even make a little money on the side while doing something you like.
- Check out your local community sports and signup in a league or a class. This is usually really cheap and it is super healthy.
- Start meeting your neighbors. This is a great way to make new friends and build a strong community.
- Visit a free museum or a local zoo. Even paid exhibitions usually offer free entry on Sundays or on specific days of the month.
- Cook some meals in advance. This can be for your work lunches or future dinners and it will save you money.
- Try a basic meditation technique like focusing on your breath. I recently tried the Calm app and really enjoyed it.
- Go on a wandering walk in your neighborhood or go hiking up in nature. I find this is a great way to relax.
- Donate some unwanted things to a local charity. This is the opposite of shopping and it will help others!
You might have noticed that throughout this whole list of things to do, none of them will get you into credit card debts and all of them will make you grow as a better person within your community. The whole purpose of leisure, whether it is spent shopping or walking in the park, is to make you happy right? Shopping must make you somewhat happy if so many Americans spend so much time at it.
More things won’t make you happier
Looking at the chart below that categorizes purchases by the level of happiness it brought to its purchaser, you can notice that experiences are generally what brings us the most happiness.
Top Purchases that Make American Adults Happiest
Percent of Adults Who Said This
Top Purchases that Make American Teens Happiest
Percent of Teens Who Said This
Entertainment (i.e., books, movies, music)
Entertainment (i.e., books, movies, music)
|Furniture/Home Décor||33%||Furniture/Home Décor||17%|
Entertainment and travel are the purchases that bring adults the most happiness. I completely relate to this but there is a lot of ways to entertain yourself and travel cheaply. Try to find cheap or free hobbies and travel with rewards to get cheaper or even completely free trips!
To conclude, I do not think that shopping makes you happier but rather the experiences you could get from it. Once you understand this, you can easily find experiences that will make you happy without spending a dime.
Almost 69% of American adults shop online when they find a great deal they can’t pass up. – Ebates
You know what is an even better deal; don’t buy it in the first place!
That is like 100% off !!!
I hope you the best of successes in your journey and remember, be happy! Xyz.
4 replies on “Wondering how to pick the right stock? Ask your cat”
I totally agree with you that experiences are much better than stuff. Recently happiness for me has been buying used board games and having friends over. This is an incredibly cheap activity and I love it. My competitive juices flow, I get to try different strategies and most importantly I get to have great conversation with friends.
I found a lot of good games online for less than $10, great cheap entertainment!
I don’t think shopping would make me very happy when I feel down. Experience trumps material possession ANY DAY of the week. I think it’s cause of how we’re biologically programmed because we’re social creatures but hey, I’ll take it. Catching up with my friends on the weekends and talking to them really helps my spirits!
Definitively! Socializing has a much bigger effect on me too.