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Mondial Academy: It’s a market of stocks and not a stock market

It’s a market of stocks and not a stock market

Stock-picker or stock market? A valid question in times of crisis. For those that missed the news: the world is in crisis- to the point where the Oscar Wilde of the investment industry, Warren Buffet, sold his Berkshire Hathaway holdings in airlines on the basis that “the world has changed” for the aviation industry.

It can’t be that good for a host of other businesses as the Buffet-view is one that suggests that the S&P market has some way to fall before it scrapes the bottom. So- why doesn’t he sell everything? That takes me to a favored Buffet quote on his three biggest mistakes: “selling Coca-Cola, selling Coca-Cola and selling Coca-Cola”.  

The point of course is that if the Sage of Omaha doesn’t know when the market is going to fall, or when it is going to rise, then he is better off doing nothing. In short, if he can sleep at night with a stock which is fundamentally a good company that will eventually restore to profit, then he would not be inclined to sell, but simply hold until “fair value” is restored.

The flyer from VAM Funds provides and insight into the battle between selecting specific stocks versus relying on the aggregate of the market. The flyer reflects the battle as the time spent in Bull and Bear S&P markets.


Our VAM flyer lays out the case for trusting the market over time. They are convinced “markets will recover”. They can rely on a number of aspects of usual market recovery. Firstly, in a standard year well over 50% of an annual gain is in a handful of days.

Picking those days is notoriously difficult for the best of traders meaning that, if the market is going to inflate upwards, you might as well simply hold it and not trade it in case you miss the upward volatility.

Secondly, very few asset managers outperform market indices. Momentum asset manager research suggest that across asset classes some 80% of managers fail to beat market indices. Much of the reputation of market ETFs is built on low prices but also the bull market over-performance of the market versus asset managers.

Need that explained? Speak to one of our advisers.

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