Choosing between index funds and individual stocks is like deciding whether to savour a comforting thali meal or experiment with a specialised dish.
If you’re a culinary whizz who understands flavours and combinations well (akin to the ‘Roots & Wings’ philosophy), cooking a specialised dish, like individual stocks, could be a rewarding experience. ‘Roots’ are the fundamentals, and ‘Wings’ signify growth potential.
However, being a master chef requires time, skills, and patience, just as managing individual stocks does. The potential for high returns is tempting, but don’t forget that the risk of getting the recipe wrong is also high.
Index funds, or the thali, on the other hand, offer a balanced meal of diversification, spreading the risk across multiple dishes or stocks.
Even master chefs occasionally enjoy a well-prepared thali, appreciating the benefits of diversity. Likewise, while individual stocks can be exciting and rewarding, it’s often wise to mix multiple strategies. It helps to not see the world in binaries.
