Ndubuisi 'Andy' Egwim explains why most people, especially busy professionals like doctors, should choose index funds for broad diversification and lower risk. He contrasts this with his own concentrated approach of picking 6 to 10 stocks, and notes that index funds beat stock-picking when you lack the time and interest to attend shareholder meetings.
Now that is like the way you look at index fund. They are investing in a broad, no, investing in many rather than one. Another way to think about it, someone could say, well, I don't want to invest only in the Premiership now. I want to invest in all the clubs. I want to invest in clubs in La Liga. I want to invest in clubs in my united, the Premiership. I want to invest in clubs, you know, in all the leagues. Obviously that would dilute you further. Okay. And that would mean that even if you win, it may not be that great. So basically you are diversifying. But the more you diversify, that means that, okay, you have less chance of losing, but you also have less chance of winning big. So as an investor, because that's how I started, I'm usually in six to ten stocks. That's it. But will I recommend that? No, I don't recommend that for most doctors because you're not going to stay up and start doing the analysis I'm doing. You're not going to attend investment calls. Earlier this year I was in the US for Warren Buffett. You know Warren Buffett, I was in his shareholders meeting. Many of you, you don't have time. And I'm glad that you are busy because you are busy doing meaningful work. You are saving lives. You're doing so many things and as an investor, you might not even like to do that. I enjoy it. So that's why for most doctors, it's better to just buy a well diversified index fund, which there are so many of them. So they might want to buy an index fund. They don't want to buy just the S&P 500. They want to buy SMP 500. That is ethical. They might want to buy SMP 500. So these are different baskets already exist.
