In today’s investing world, in which ‘passive’ investments such as index funds are hugely popular, picking stocks for an ISA might seem a little old school. Yet, here I am still actively selecting shares for my portfolio.
Why? Well, there are several reasons. Here’s a look at why I haven’t abandoned stock-picking just yet.
Fist-pump moments
Index funds can be a great way to get diversified exposure to the stock market. However, for me, this approach to investing is a little boring.
Personally, I enjoy spending time analysing companies, spotting trends, and unearthing hidden opportunities. This keeps me engaged and motivated.
Meanwhile, I love the euphoria that comes with landing a big winner. If I was to switch to passive investing, I would miss the ‘fist-pump’ moments that come with stock-picking.
The potential to beat the market
This leads me onto my second reason for sticking with individual shares. When picking stocks, investors can potentially generate market-beating returns.
Now, beating the market isn’t easy. In fact, a lot of professionals struggle to do it. But it’s certainly possible. All that’s really needed to outperform over the long term is a few big winners.
It only takes a handful of big winners to make a lifetime of investing worthwhile
Legendary fund manager Peter Lynch
Thankfully, I’ve had my fair share of winners in recent years.
Apple (NASDAQ: AAPL) is a good example. I started buying shares in the iPhone maker in late 2018 when they were trading for less than $40. Today, they’re trading at $180 – around 350% higher.
If I can keep picking winners like this, I may be able to achieve financial freedom faster.
So many opportunities today
Finally, picking stocks gives me the ability to customise my portfolio. My ISA isn’t just a collection of random stocks – it’s a reflection of my values, interests, and long-term vision.
I’ve invested in companies I believe in, all of which have innovative products/services and look set for strong growth in the long run.
And what excites me is that there are so many opportunities for long-term investors like myself today. With the world currently undergoing a major technology revolution, there are lucrative opportunities everywhere.
Going back to Apple, it’s likely to release artificial intelligence (AI)-enabled iPhones in the next few years. I think this could be a game-changer for the company.
It’s also likely to refine its new Vision Pro headset. In five years’ time, this headset could be far more powerful (and streamlined) than it is today.
Additionally, the company is continuing to make moves in the digital healthcare space. According to CEO Tim Cook, healthcare will be the company’s “greatest contribution to mankind”.
Given the innovation here, I plan to hold on to the stock. It’s a $2.8trn company today with a relatively high valuation, which is a risk. But I reckon it has the potential to continue delivering above-average returns in the long run, although there are no guarantees.
A rewarding experience
Of course, stock-picking isn’t for everyone. It requires time, effort, and a healthy dose of risk tolerance.
Yet for those who have the time for it, and believe in their ability to identify winning investments, it can be a very rewarding journey.
