Good morning.

My latest column, Want to Beat the Stock Market? Avoid the Cost of "Being Human," contends that one of Wall Street's favorite arguments is a myth.

Institutional investors, such as pensions and endowments, hedge funds, insurance companies, mutual funds and the like, have the immense resources, expertise and brainpower to beat the market, we have long been told. They are the smart money.

Individual investors are the dumb money. They take the wrong side of the trade, get the short end of the stick, buy high and sell low, and end up as victims and "muppets."

That's a big load of you-know-what.

Professional investors have to measure their returns against the market every year, every quarter, every month — in some cases, every hour and every minute. Individual investors don't.

Professional investors charge fees, often 1% per year and sometimes far higher. Individual investors don't.

Professional investors, because they're measured against the market and because they charge fees, have to trade — a lot. Individual investors don't.

If professional investors hold a stock for as long as a year or two, that's close to a miracle. It recently cost roughly 0.5% for the typical institutional investor to make a round-trip buy and sell trade in a U.S. stock, according to estimates from the Securities Industry and Financial Markets Association. Individual investors can trade for a fraction of that.

Trading costs are not included in fund expenses. They get shaved off a fund's return every time the manager trades. By contrast,  — a individual investors can reduce their own trading costs to near-zero by sitting still in a stock.

Nearly 30 years ago, portfolio manager Bob Kirby wrote:
     Money managers...have encouraged the measurement of results on a short time horizon that is a far greater reflection of luck than skill...
     Institutional investing...simply makes it more difficult to make a high-conviction, long-term decision than to make a low-conviction, short-term decision. 

Today, patience is a virtue that's even more of a luxury for big institutions than it was then. Individual investors can virtually corner the market on it — at low cost and with almost no competition.

In our last issue, I asked:

What are your favorite software programs, online tools or apps for researching and analyzing stocks, funds or other assets? (Bonus points for mentioning resources that are free.)

Here is a pretty terrific list of stock research tools compiled by The Bear Cave Substack, many of which are free. For all kinds of analytics (including backtesting and Monte Carlo analysis) I recommend Portfolio Visualizer.
—Paul Ramming, Arlington, Va.

I'm beta-testing BingChat [Microsoft's artificial-intelligence chat tool] to read/summarize news/research/filings about companies, sectors and relevant science/tech/supply chain trends.
—Guthrie Collin, New York

Koyfin for charts. Also enjoy Quartr (the earnings call app).
—Philip Cunningham III, Panama City, Fla.

GuruFocus and Dataroma allow you to follow some of the best value investors in the world.
—Joe Pellizzari, Marietta, Ga.

Finra's Fund Analyzer, to analyze and compare the cost of owning funds.
—Joan Cahill

I am a big fan of Value Line, which I get for free via my local library. I don’t get all of the reports, but the ones I can access are still valuable to monitor current positions and future opportunities.
—Greg Schultz, Gainesville, Fla.

Tikr to see detailed financials. It has a free version. You can click on any line item and it creates a chart to easily see the trend. You only pay if you want future data from analyst estimates.
—Jon Lee

Favorite online resource for making investment decisions: the Bogleheads forum. Totally free, tons of resources available in the associated Wiki, guides folks towards a low-cost approach that beats almost all other strategies over time. As a bonus, Forum members answer “portfolio review” requests, and have active discussions about many topics of general interest.
—Wayne Stuenkel, Vestavia Hills, Ala.
(Editor's note: I've often written about Bogleheads.org, most recently here.)

Do you own any stocks that you plan to hold for at least a quarter of a century? How did you identify them? Why (other than their past performance) do you think they are likely to be winners into the long-term future?

Just hit reply to share your thoughts. Remember to include your name and location. Responses may be edited for clarity or brevity.

Be well and invest well,

Jason

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He will get to the goal first who stands stillest.
—Henry David Thoreau