title: Do you believe in investing in individual stocks? / I pick my own stocks. description: [AFW S.12.8] Securities Objection #8 published: true date: 2026-06-30T08:08:21.302Z tags: editor: markdown dateCreated: 2021-04-27T22:30:06.394Z

Watch MKOM 1604: Do you believe in investing in individual stocks?

“With a million bucks and a hot tip you can go broke in a year.” ―Warren Buffett

“Investing is how you make money. Trading is how you lose it.” ―Naval Ravikant

“The big money is not in the buying or selling, but in the waiting.” ―Charlie Munger

“Day trading is a sucker's game. Don't do it — ever.” ―Charles Ellis

“The average investor is not really an investor; they are gamblers. They buy based on tips and sell based on fear.” ―Robert Kiyosaki

“The stock market is a platform where short term thinkers give their money to long term thinkers.”

The Stocks vs Companies Game¶

To drive home the companies versus stocks distinction, consider this thought experiment. List ten companies whose products and services your family uses nearly every day.

Example¶

1. Apple. We have two Apple laptops and one iPhone.
2. Alphabet. Most of our family owns Google Pixel phones and we google stuff a jillion times a day.
3. Netflix. Somebody’s always watching something.
4. T-Mobile/Mint. The wireless carrier of our phones.
5. U.S Bank. We bank there.
6. USAA. Carries our personal and business insurance.
7. Procter & Gamble. The family consensus is that Bounty is, in actual fact, the quicker picker-upper.
8. Amazon. Somebody’s always ordering something.
9. Citibank. Many of our credit cards are issued by Citi and are in constant use.
10. Berkshire Hathaway. Seems like our lives run on Duracell batteries!

Would you stop using any of these products and services if the stock market went down 50%?

No, of course not. And neither would just about anyone else. That’s the critical difference between stocks and companies. Stock prices can crater, and they often do, if only temporarily so far. But as long as real people continue to buy the products and services of great companies like the ones I’ve just named, they’ll endure. And, if history is any guide, they’ll resume the gradual increase in their earnings and dividends — a process that has delivered an average annual compound 10% return for almost a century.

Script 1: Diversification¶

This script specifically handles the following objections:

• "I do my own investing."
• "I invest in stocks directly, not mutual funds."

Use when the client asks about investing in individual stocks. Maybe they're a day-trader (or think they are). Or, they don't understand the distinction between stocks and mutual funds. Note the short response. Resist the temptation to elaborate on mutual funds, unless they ask for more details. At this juncture you're just illuminating the diversification of mutual funds vs stocks.

"I will *never** own enough of any one thing to be able to make a killing in it. Nor will I ever own enough of any one thing to be able to be killed by it. Diversify."* -Nick Murray

"I have no capacity to analyze individual stocks, and do not believe that serious investors should attempt stock- picking. My work involves investing my clients’ serious capital in broadly diversified equity portfolios." -Nick Murray

“I see myself as buying stakes in companies - pieces of businesses. Rather than pieces of paper which can be easily traded in the market.” -Michael Cohen, Portfolio Manager at Capital Group, London office

"How to do you get to $1 million by trading individual stocks? Start with $2 million!" -Michael

Save $10,000 for 25 years.¶

Which result do you prefer?

Read Nick's NMS 76 - Underdiversification / concentrated stock positions PDF

Prospect: "Do you recommend I invest in individual stocks?"

Advisor "Yes, but only in bundles of 100 or more. It's called a mutual fund. Mutual funds let you invest in hundreds of the world's great companies simultaneously thus giving you diversification. Eggs in multiple baskets. See, instead of trying to find the needle in the haystack, just buy the whole haystack.

Remember this axiom: 'I never want to invest so much in any one thing that I can make a killing in it; nor be killed by it."

Script 2: Are You Really That Good?¶

Prospect: I pick my own stocks.

Advisor How much do other people pay you to invest their money for them?

Prospect: Huh? No one. I just do it for me.

Advisor So, if other people don't entrust their money to you for their future, why should you? (Say this softly and delicately.)

Prospect: Well, I'm doing pretty well.

Advisor Prospect, I have a guy, a Team actually, that overseas billions of dollars, they travel the world investigating companies in person, and they have a track record of return x% for over y years. And they only charge cents on the dollar. If you could get access to that why wouldn't you take advantage of them, and take the stress and work off of your shoulders.

Prospect: What are you talking about?

Advisor Mutual funds. Specifically, American Funds. (or whatever fund family you are recommending.)

Script 3: Compare to ICA¶

Watch video walkthrough AMF - ICA - Stock Picking pages VIDEO

Show the American Funds ICA brochure "Stock Picking" pages and say the following:

Advisor "The way to successful long-term investing, especially for something as important has a three decades long time period called retirement, is to invest in a broadly diversified collection of the world's great, publicly-traded, mainstream companies - this is called a mutual fund; and I believe in only using those who have been around for over 40 years and have averaged at least 10% after expenses."

Script 4: Client insists they want "play money".¶

"If someone genuinely wanted to try stock-picking, I’d encourage him to take, say, five percent of his portfolio and open an account with some discount brokerage. I would cer- tainly not refer him to specific stocks because that would suggest you’re in some way willing to be responsible for its recommendations, which you must never for a moment appear to be." -Nick Murray

Read Nick's ATY 141 May 21 - Play Money: A Potential Stopgap PDF