There are three big, deep stock markets in the world: the US, Japan and China. Xi Jinping has made China too toxic for me, leaving Japan and the US. I think Japan is interesting as a special situation market–as is Europe, in my view–but the country still marches to its own drummer, following samurai rules that have generated three decades (and counting) of economic stagnation. So the US is not only the deepest and broadest equities market in the world. It’s effectively the only game in town.
Americans invest for two main reasons: to send their children to college and to fund their own retirements. These are long-term goals. Financial intermediaries, however, can make a substantial amount of money through short-term trading. So our interests and theirs are not fully aligned.
The same for what might broadly be called financial information services–TV, radio, newspapers, podcasts, subscription services… There are bright spots, like the Financial Times, the Economist, Morningstar, the Nikkei services. But the rest remind me of sports talk shows, except there are many more of the latter and they most often feature ex-professional players providing insight.
Very few professional investors (or at least professionals who offer their services to you and me) end up beating, or even staying even with, the US stock market in any given year. Only a miniscule number achieve this over an extended period of time. Fidelity Magellan during the Johnson/Lynch management tenure of the 1970s is perhaps the notable exception. Then, after a long successful run, Peter Lynch retired. So holders suddenly had to figure out what to do next.
There’s also the question of fees. A “full service” broker might charge a total of 2% of the assets under management per year, for investment performance that, before fees, lags the S&P 500. A Vanguard index fund, on the other hand, will deliver index-matching performance and charge .05% of the assets. That’s 1/40th of the traditional broker fee. Assuming the market rises by 10% each year (it won’t, but this makes the calculation easier), the Vanguard customer is 40% ahead of “full service” after a decade, based only on the fee difference.
While I was working, all the money my wife and I had discretion over was in the portfolio I was managing. Today, it’s 80%+ in index funds, with the rest in a handful of stocks I have a lot of confidence in.
For someone just starting out, I think the index number should be 90%+, with one or two stocks to watch like a hawk while you gain experience.