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  • Writer's pictureIshfaaq Peerally

Stock Picking vs Index Fund Investing

If you had invested in the S&P 500 $SPX500 during the crash of 2020, you would have doubled your money today (100% returns). My portfolio returned 285%. I picked 3 out of the 7 best performing stocks in that period, namely, GameStop $GME , Caesars Entertainment $CZR , and Freeport-McMoRan $FCX . How did I pick these stocks? Should you pick stocks or invest in an index?

I invested in these 3 stocks for different reasons. GameStop was a deep value stock trading under its net cash value and was aggressively buying back shares leading to a short squeeze. Caesars Entertainment was an arbitrage deal. Freeport-McMoRan was undervalued as the market failed to see the long-term Copper supply gap. But the underlying principle for all these 3 investments was value investing. How did I find these stocks? I did research. If you are willing and have the time to do research, it is better to do it.

But stock picking can also be more volatile in the short-term and you are certainly going to make mistakes as I did with DouYu $DOYU . I have noticed that I make more mistakes when I'm doing that much research, for example, when I was studying for my CISI exams. There is nothing wrong with investing in an index fund but then, of course, you will have to aim for only average market returns.

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Full analysis of GameStop:

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