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Buy and hold the S&P 500. Buy and read the intelligent investor by Benjamin Graham.
Get a financial advisor that you know and trust.
Invest in index or mutual funds unless you have the time to spare researching companies.
D1, that’s just not true and definitely not wise to tell someone new to investing. A widely accepted view of markets is the efficient markets hypothesis - this says all relevant information is already factored into the price. As a consequence, this essentially makes “beating the market” impossible.
There is no correlation between fund managers that beat the market in year x and their performance in year y. Even in a world where markets might be bearable on the margins, the capital requirements and/or your risk tolerance would need to be damn high.
Finally, for a brand new investor like OP, trading costs would likely eat up or exceed any above market returns.
Unless you literally think you are the second coming of buffet (or third if you think Ackman is something beyond a giant douche), just buy low cost index funds.
To be even more specific, open an account at Vanguard and set up a money market fund for liquidity and short term cash and an S&P fund. Then arrange to make monthly automatic deposits.
You probably don't
If want to invest by picking and choosing stocks you essentially need to take it up as a hobby. The reason why everyone is told to just invest in funds is because the average person isn't capable of outperforming the market. But it's possible to consistently beat it, you just need to spend way more time and energy on it that it's not worth it for most people.
Google a lazy portfolio.
Buy Facebook. It’s oversold because of the scandal. They’re going to beat earnings again
M1 markets are not efficient. Yes information tends to get priced in based on information. However if it was efficient there wouldn't price movements constantly. Markets are constantly over or undervalued. Buffet is one extreme, but he's proof it can be done. He also advises people to invest in low-cost index funds because it's true, the average investor sucks at investing. Doesn't mean that there isn't profit to be made beyond "average marker".
In other words, I already addressed your point. New investors shouldn't pick stocks, but if they're seriously interested they could educate themselves beyond "low cost funds".
Perfect example, why did only a very small group of investors end up shorting the real estate market even though the signs all pointed to an overpriced market and eventual collapse of the sub-prime mortgage backed securities? Market inefficiency.
I predicted the rise of Nvidia and AMD after noticing shortages in graphic cards from cryptomining because I build PCs. The stock market wasn't even aware of that. Easy money.
75 percent of professional fund managers do not beat the market. Warren Buffet made a bet with George Soros about this exact point. http://money.cnn.com/2018/02/24/investing/warren-buffett-annual-letter-hedge-fund-bet/index.html
D1, you’re talking about single events as proof points that markets can be beat. The flaw in your hypothesis is that all of those real estate shorters didn’t enter the market and exit the market immediately - they made bets before and they made bets after. Over the long term, this is a losing strategy. Price movements do not show inefficiencies in the market. Your argument also gets weaker if that’s your proof because you’re no longer advocating for finding undervalued stocks, but just random luck of “timing” the market, which has also been shown to be a failing strategy.
M1 You're partially right. That's the point. You do find undervalued securities. The hard part where people do fail is due to leverage or lack of discipline. The real estate market was more irrational than the investors were solvent. You solve this problem by not overborrowing money on your investments and having a strong investment strategy until the markets become rational.
So D1, let’s take your example of graphics cards. First, that’s a great win, but where’s the ledger on losses for similar bets you’ve made. Second, where was the money you used to make those bets sitting and for how long? What was the next best alternative for that money? The problem with a big win is that it often can’t outperform a long history of smaller gains!
M1 my portfolio also consists of mutual funds as well and is a very important part of my investments. Then if I see a investment opportunity I will take it and reallocate. The bet on graphics card was a short turnaround, I only waited for a quarter for their earnings to get released. They were still available in March and by May everything was sold out and people were flying to Asia to try to secure shipments directly from manufacturers.
I mean you'd have to take my word for it, but my track history and ledger for similar bets have overperformed the market many times.
I don’t not believe you but humans also have a tendency to remember big wins and forget small losses. The problem with holding your money in a mutual fund is that if you see a bet you want to play, you have to sell and may be selling at a loss - again, timing the market is next to impossible. My bullshit meter will go wild when you say you e never sold and rebought your mutual fund to make a big bet and seen a loss on the mutual fund sell/re-buy