James Helliwell argues stock-picking beats ETFs for building wealth and walks through his method: concentrated portfolios, two-year minimum holds, and AI screening for momentum and quality stocks. He shows how 1 in 20 fund managers beat the market over 20 years, and runs a retirement projection where a 30-year-old with £34k saved could end with vastly different amounts depending on fees and performance.
Questions this video answers
Only 1 in 20 fund managers outperform the market over a 20-year period (net of fees).
A minimum of two years.
Age 30, existing savings ≈ £34,000, contributions £500/month, 37 years to retirement, subtract 0.1% ETF fees, 3.1% inflation; base result ≈ £1.4 million; with a typical advisor fee (~2%) result ≈ £850k; adding 2% over market (and removing 0.1% ETF fee) ≈ £2.5 million.
Chapters
ETFs are for chumps and the chances are they're the only thing you invest in. But the fact of the matter is that you don't know what you don't know and you're going to end up paying for it in ignorance tax. So in this video I'm going to show you exactly how to beat the market by picking stocks and why most people will still bury their heads and do nothing about it. But before we get into that, let's go through some of the myths that I'm here to dispel today. The first one that I commonly see is that it's too complicated. The next objection is that I don't have time. And the third one is that nobody can beat the market. So I actually want to address these, beginning with the popular myth that nobody can beat the market. So according to data, only 1 in 20 fund managers outperform the market over a 20 year period. And that is pretty shocking, I must admit. But the fact of the matter is that this data is net of fees fees. So after you've paid them, if you're capable of doing it yourself without incurring those fees, you surely stand a chance of adding extra performance over that which you would get with an etf. And there are several sources of edge which I'm going to go through now, the first of which is your time horizon. Studies have shown that everybody is now playing an increasingly short term gain. The average holding period for a stock in the New York Stock Exchange has dropped from several years to a matter of months. High frequency trading algorithms, all the hedge funds, it's impossible to make money there anymore. The longer you invest, the greater your potential outperformance or excess return that makes it worthwhile. The next source of edge that I personally employ is in portfolio concentration. Not running loads and loads and loads of positions, having conviction and not diversifying, thinking that you're reducing risk, when really you're just taking on incrementally risky bets. The exact opposite of passive investing or buying everything. But as I'll show you a little bit later, I've simplified things using AI and I'll walk you through that too. The third major pillar of outperformance is in factors momentum quality. And just to break these down for a moment, by momentum we mean winners tend to continue winning. And it makes sense that better quality companies should see better returns. And this is consistent across the us, the uk, multiple geographies over multiple periods, just as you can see from these studies here. So this provides the three main pillars for Outperformance. When I pick stocks, the reason people cling to ETFs is actually due to loss aversion. It's all behavioral bias. The truth is, you're more afraid of f ing it up than you are being competitive in the pursuit of outperforming the market. You're either too lazy to learn or too complacent to care. You deny that it's worth your time and effort to figure this out. It's like giving up on dating or not asking the pretty girl out who you think's single and might be into you for fear of rejection or having to take the time and effort to date her and get to understand her while the next guy approaches her, chats her up and they're going to live happily ever after. Believe me guys, it's possible to outperform the market and your rejection of that is just bloody cope at play. Let's move on to the remaining objections. It's either too complicated or I just don't have time to do this. Now imagine that there was a way that made it quick and easy to analyze stocks to follow. A process in a way that didn't require you to be constantly eyeballing the market, looking at charts, reading the news, frankly worrying about things. Well, guess what I've developed. Given my smarts and expertise in the market and the fact that I sacrificed every waking second and then some of my twenties obsessed with figuring this out and coming out pretty well on the other side of it, I've very kindly developed my own AI to help you with this. You can use it in just the same way as GPT. It's so simple to to prompt. So let me take you through how it works. What are the top five tech stocks? It will run the model, run the analysis through thousands of securities and here we go. As quickly as that. It's given us a list of 5 results. We could then prompt it to say, okay, give me a radar chart based on the top two for comparison. This very clearly shows that the company with the yellow footprint is is broader in terms of efficiency, profitability, the price trend, reinvestment and valuation than the second company in red. Now, I'm not going to reveal these names exactly, but if you want to get a short list of the top companies per category, just comment top stocks and I'll send you that on Instagram. But what if you didn't want to go through single stock or sector idea generation? Give me suggestions for a portfolio of the top 20 stocks. And just like that, we have a list of 20 of the highest quality companies that combine superior metrics and also stack those edges inside of my portfolio. Every company I invest in I hold for a minimum of two years. So if you were getting started today, you built your portfolio, it begins the clock on that sand timer. We've overcome the objection of it's complicated. I've just shown you how easy it is and also the time objection. I've just given you a two year window there to do nothing. And in fact, the more you can remove yourself from the process and maintain discipline, the better. And my best returns have come in the last couple of years since I've been able to do that without having to report things to shareholders, without my clients calling up and asking how the performance is. I've been able to just sit back and let my money work for me now that I'm out of the industry. It's been beautiful. To quote Donald Trump, beautiful. Anyway, let's pull up our trusty FT.com calculator here. So we'll assume that you're 30 years of age with the typical amount invested by that point, which according to studies by legal in general is about 34 grand. And you and you're contributing 500 pounds a month, again typical for somebody of that age. Assuming 37 years to retirement at the historical market return, we'll take 0.1% off for the ETF fees that you're going to incur and 3.1 for inflation. Your total pot would be about 1.4 million. I wish that this was the default position for everyone that I work with when they come to me, but unfortunately the reality is that too many people are getting suckered by advisors. So let's just quickly subtract the typical advisor fee from this, the best part of 2%, they would only end up with about 850k. Now that's not going to be enough for a comfortable retirement according to the PLSA. But let's now add 2% over the market and we can eliminate the 0.1% typical ETF fee as well. Almost two and a half million quid. And you could potentially be investing more than average or for a longer period than average. And that naivety will end up costing you an awful lot more. So the question really is, can you afford not to take action on this? If you enjoyed this video, then check out this one, which I think you're also going to enjoy.
