Retire on Single Stocks, Not ETFs

Happy Thursday. We are a week away from preseason hockey and it is incredibly exciting. Even more exciting is the Ryder Cup next week. Honestly sports just rock right now.

In one of my group chats with some buddies, every once in a while someone asks what to invest in. I always say pick a single, my friend says buy an ETF. This leads to a long discourse about what the better strategy is. Today I’m going to lay out my side.

First, let me be clear on my position.

I believe as a 25-yr old the best strategy is to mix ETFs with single stocks. Roughly 50/50. This does not mean go and buy a $500m nuclear energy stock because they may or may not get a government contract. When I talk about single stock picking I am talking about buying the best companies on the market. Nvidia, Amazon, Netflix, Apple, Google, Uber, JP Morgan, and so on and so forth. I believe that market dynamics have shifted dramatically since 2020. This shift has resulted in this companies becoming less and less risky to own outright. As my friend said about buying these single stocks, “It’s kind of like buying leveraged SPY ETFs”.

The other side

Everyone against me gives me the same old argument. "Well historically speaking, investing in mutual funds and ETFs will out perform stock picking in the long run”. I argue against this in a few ways:

1. Do not try to compare the markets of 1992 and 2004 to the markets of 2025. The game has changed and market dynamics are, in my opinion, very different.

2. Stock picking throughout 3,000 stocks will result in underperformance, but consistently picking the best companies on the market will result in better performance than a boring Vanguard S&P 500 fund.

I’m going to lay out evidence for both below.

Market Dynamics

Covid shifted people’s psychology and activity in the financial markets. Besides realizing that they can’t stand being trapped in the same house as their family for more than a month, people realized that the stock market is one of the most incredible wealth building tools.

The Consumer
I believe the strength of the economy and the market fully depend on the consumer. Are people buying products and spending money? Or are they afraid of getting fired and seeing their wealth dwindle with a slowing stock market? In the latter case, the fearing consumer has traditionally has accelerated a recession.

Covid changed this. Now I could go and locate all the economic data, but sometimes economics is just a ~vibe~ thing as my friend Paul would say. If people have an income, they are spending. The consumer “slowing down” doesn’t mean the same thing that it used to. Market down? Consumers will still book that trip to Europe. They will still buy the luxury jewelry. They will still go to the concert (or 5 if you are me). We all lived through a time where we couldn’t do sh*t for months at a time. Everyone who experienced that now feels to share a unified desire to live life no matter what. Economists have been waiting for the consumer to weaken in the past few years, but it keeps just not happening. This translates to a stronger and more resilient economy.

The Consumer & the Market

On top of this, more new investors have entered the market since covid than ever before. And these investors trade different, they don’t shy away from downturns, they embrace them and buy, not sell, when they happen.

Let’s look at the last 5 years. Investors have seen 3 massive downturns:

In traditional market environments (think 1990-2020) investors would heavily sell off these drops and stay out of the markets for a while. They anticipated these sell-offs would last months even a year at a time. And who can blame them? It took 5.5 years to recover 2008 losses. Here’s where I really start to love these charts and tables I made.

Let’s look at how long it took to recover those losses:

Traditionally investors would have been scared to enter back into the market so quickly after these crashes. Nowadays, if you wait for just a few months, you are already behind.

Picking the Top Stocks

I’ll concede some points. No one knew what the f*ck was happening during covid and 2022 took 18 months to fully recover losses. Let’s look at 2022 first.

Assuming you were in and S&P 500 ETF during that time period, it took you 18 months to recover those losses. Now let’s see what it looks like if you were stock picking and only held the Mag 7 stocks:

You recovered your losses on all the mag 7 stocks a full 8 months before someone just holding an S&P ETF.

We saw this mentality in April with the tariff scare. People aren’t scared of downturns anymore. They invite them, because as soon as they happen retail investors start buying instantly. You know how many people have told me they bought Nvidia stock sub $100 in April? This activity allows for recoveries to happen quickly in these single stocks vs the broader index.

So how does it look to have invested in the Mag 7 over the past 5 years?

Well the market cap of the Mag 7 grew 800% well the broader index only grew 150%. These companies are incredible at one thing: making absolute craploads of money. They are really good at it. They are more efficient than ever, making more money than ever, and becoming less and less risky to own everyday. Let’s quickly show off the earnings growth of these companies compared to the rest of the S&P 500:

Before you tell me earnings growth is declining, let’s remember than 2023 earnings were coming out of a bear market.

Final Point

I could also make points like diversification requirements in an S&P 500 etf, the knowledge and learning you get from holding a single stock, and a few others, but you are also probably get the idea.

As I said in the beginning, don’t put all of your money in penny stocks and shitty companies. Buy the best companies in the world, the ones you use everyday and you can’t live without. Those companies, on average will return higher than the broader index. This also means they will go down more aggressively than the broader market, but that’s why I’m not giving this advice to my grandma. I’m not retiring for 50 years. If Apple stock falls 25% tomorrow, I’ll live.

Be young and aggressive in the stock market, it’s worth the risk.

*Nothing said in this article should be consider financial advice. Please consult a financial professional before making investment decisions.