It’s a Stock Picker’s Market

If you read or watch financial commentary, I’m sure you’ve encountered this piece of insight:

“It’s a stock picker’s market.”

I heard a guest say this in a recent episode of WealthTrack. Is it true?

Absolutely. If someone picks the right stocks, they will have a better performance than the market. There’s no doubt about it. It’s a tautology.

In any market, whether it’s going up, down, or flat line, there will always be stocks that do better than others and stocks that do worse. There will be stocks that do much better than the market and there will be stocks that do much worse. That’s what makes up a market. If you happen to have picked the stocks that do better, you will do really well. Therefore it’s a stock picker’s market. It always is and it always will be.

There’s only one small problem. The right picks are defined by whether they do better after the fact. You can have a thousand good reasons why a stock should go up. Just going up is not enough. It has to go up more than the market does. That’s the holy grail. Whoever know the secret are not speaking. They are busy making money.

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  1. Dylan says

    I’ve recently started reading your blog, and you have a lot of great stuff here.

    “Stock picker’s market,” is redundant as stock pickers are what make a market into a market, so in that sense, I agree that is is always a, “stock picker’s market.”

    I think the message many financial commentators trying to communicate with that phrase is that current conditions favor the stock pickers to beat the market (vs. indexing). However, if the stock pickers are the market, that group cannot beat themselves, an ever present condition. For one stock picker to better the market by $1, another stock picker must lose to it by $1, and they both still have expenses too. Because of those expenses, stock pickers collectively must actually underperform vs. the market, no matter what market environment we’re in. So in that sense, it can never be a, “stock pickers’ market.”

  2. Financial Samurai says

    I believe this is true too right now. Volatility is going through the freaking ROOF!

    Time to pick wisely.

  3. Investing 101 says

    It would be nice if those people doling out such lines as “it’s a stock picker’s market” were required to actually sit there and explain to the general public (as opposed to people who “get” finance) what they mean.

    Otherwise, they’ll keep looking like geniuses, saying stuff that doesn’t actually mean much, and keep getting paid for it!

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