The Challenges of Stock Picking

Amateur and even professional investors face significant challenges when trying to pick winning stocks, as evidenced by research indicating that many active fund managers struggle to outperform their indexes. An investigation revealed that although around two-thirds of the biggest bets made by fund managers were on winning stocks, less than a third of the funds managed to achieve overall market outperformance. The findings suggest that not only are high fees associated with active management a factor, but there is also a broader issue of a lack of winners within the rest of their portfolio. Consequently, a deeper understanding of the hit rates associated with the remaining stock picks in a portfolio is crucial to evaluating the overall performance of active funds.