Why Bogleheads Hate Your Stock Picks
Best for: Anyone who’s mentioned buying individual stocks on the internet and immediately got lectured about index funds.
If you’ve ever spent time on investing forums, you’ve met the Bogleheads. They’re the people who respond to every stock pick question with some version of: Just buy an index fund; usually VOO or VTI.
Someone asks about Tesla? “Index fund”. Someone is excited about a healthcare stock? “Index fund”. Someone inherited $50,000 and wants to invest it? You guessed it. “Index fund”.
At first, this seems annoyingly simplistic. But the more you learn about investing, the more you realize they’re mostly right.
Who Are the Bogleheads?
The Bogleheads are followers of Jack Bogle, the founder of Vanguard and creator of the first index fund available to retail investors (an S&P 500 mutual fund) in 1976. Bogle’s philosophy was simple: stop trying to beat the market and just own the market.
His most famous quote captures the entire philosophy: “Don’t look for the needle in the haystack. Just buy the haystack!”
In other words, stop wasting time trying to pick winning stocks. Just buy an index fund that owns every company in the market and move on with your life.
Bogle spent decades arguing that “owning the stock market over the long term is a winner’s game, but attempting to beat the market is a loser’s game.” His point wasn’t that you can’t pick winners. It’s that after costs, time, and mistakes, most people don’t.
Even Warren Buffett Agrees
You know who else recommends index funds for most people? Warren Buffett. The guy who built a $100+ billion fortune by picking stocks tells regular people not to pick stocks.
Buffett has said repeatedly: “I do not think the average person can pick stocks.” His advice? “For most people, the best thing to do is owning the S&P 500 index fund.”
He’s even more specific about the strategy: “Buy a cross-section of America and just forget about it.”
Buffett’s suggested allocation for most people? 90% in an S&P 500 index fund and 10% in short-term government bonds. That’s it. No fancy strategy. No stock picking. Just own everything and go live your life.
The irony is obvious. The greatest stock picker of all time is telling you not to pick stocks. That should tell you something.
The Case Against Stock Picking
Why do Bogleheads hate individual stock picks so much? Because the data is brutal.
Most active fund managers (professionals who pick stocks for a living) underperform the S&P 500 over long periods. If the pros can’t beat the index consistently, what makes you think you can?
And even if you do pick a winner, you have to pick enough winners to overcome your losers, your trading costs, your taxes, and the time you spent researching. That’s a high bar.
Jack Bogle warned about this constantly: “Where returns are concerned, time is your friend. But where costs are concerned, time is your enemy.” Every trade, every fee, every tax event eats into your returns. Index funds minimize all of that.
The Boglehead philosophy isn’t that stock picking is impossible. It’s that stock picking is a negative-sum game for most people once you factor in all the costs and mistakes.
The Emotional Problem
Here’s what nobody talks about: stock picking is emotionally exhausting.
You buy a stock. It drops 20%. Do you sell? Do you hold? Do you buy more? You’re constantly second-guessing yourself. Every earnings report, every news article, every market swing makes you question the decision.
Index funds remove all of that. The market goes up, you’re up. The market goes down, you’re down. There’s no decision to make. No earnings reports to obsess over. No wondering if you should have sold last week.
Bogle understood this better than most: “Investor emotions plus fund industry promotions equals trouble.” The more decisions you have to make, the more opportunities you have to screw up.
The Case FOR Stock Picking
So should you never pick individual stocks? Not necessarily.
If you genuinely enjoy researching companies, if you have an edge (industry knowledge, specialized expertise), or if you’re willing to put in the time to actually understand what you’re buying, stock picking can work.
The key is honesty. Are you picking stocks because you have a legitimate thesis? Or because it’s fun to gamble? There’s nothing wrong with the second reason, but don’t pretend it’s investing.
A reasonable compromise: keep 90-95% of your portfolio in index funds and use 5-10% for individual stocks. That way, if your picks blow up, you’re not wrecking your entire financial future. And if they work out, great. You get some upside.
The Three-Fund Portfolio (Or Just Two)
The classic Boglehead solution is the three-fund portfolio:
1. U.S. stock index fund (like VTI or an S&P 500 fund)
2. International stock index fund (like VXUS)
3. Bond index funds (BNDW or BND and BNDX)
That’s it. Three funds. Total global diversification. Minimal costs. No stock picking. No market timing. No stress.
But there’s an even simpler version that’s become popular: “VT and chill”.
VT is Vanguard Total World Stock ETF. It owns everything. U.S. stocks, international stocks, large caps, small caps, every publicly traded company across the globe. One fund. Done.
The “and chill” part means exactly what it sounds like: buy it and forget about it. No rebalancing between U.S. and international. No decisions. Just own the entire world stock market and go live your life.
A lot of Bogleheads now use VT(or the combination of VTI/VXUS at market weight, which is basically the same thing). It’s dead simple and captures global market returns automatically.
Combine VT with BNDW (world bond fund) and you have a portfolio that will last a lifetime. Periodically adjusting the allocation of equity and bonds based on your age and risk tolerance.
One small tax note: if you’re investing in a taxable account, splitting VT into VTI (U.S. total market) and VXUS (international) gives you access to the foreign tax credit. It’s not a huge benefit, but it’s something. In retirement accounts, just use VT and call it a day.
Why Costs Matter More Than You Think
Bogle was obsessed with costs, and for good reason.
A fund charging 1% per year doesn’t sound like much. But over 30 years, that 1% annual fee can eat 25-30% of your returns. It’s not just the fee itself. It’s the compounding you lose on the money that went to fees.
This is why index funds matter. They charge 0.03% to 0.10% instead of 1% or more. That difference compounds massively over decades.
As Bogle put it: “Where costs are concerned, time is your enemy.” Every dollar you pay in fees is a dollar that’s not compounding for you.
The Downside of the Boglehead Approach
The Boglehead philosophy isn’t perfect. It has limitations, especially if you’re using a narrow approach.
If you’re one of the Bogleheads who only holds VOO or an S&P 500 fund, you’re taking on concentration risk. The S&P 500 is just U.S. large-cap stocks. If U.S. markets underperform for a decade (it’s happened before), you’re stuck with those returns. There’s no global diversification.
But if you’re using VT or VTI/VXUS at market weight? That downside mostly disappears. You own the entire world stock market. If U.S. stocks lag, your international holdings pick up some slack. If international lags, U.S. carries the load. You’re diversified globally at market weights, which means you automatically capture whatever part of the world is performing well.
The other downside: it still requires discipline. When the market crashes 30%, you have to sit there and do nothing. That’s harder than it sounds. A lot of people panic and sell, which defeats the entire purpose.
And the Boglehead community can be overly dogmatic. Not every financial decision has to be perfectly optimized. Sometimes it’s okay to hold a few individual stocks just because you find it interesting.
The Bottom Line
The Bogleheads are right about most things. Stock picking is harder than it looks. Costs matter. Discipline beats cleverness. Index funds work.
If you want to pick a few stocks with a small portion of your portfolio, that’s fine. Just don’t fool yourself into thinking you’re going to consistently beat the market.
And if you want the absolute simplest approach? VT and chill with a side of BNDW. Own the entire world. Rebalance it periodically. Let it compound and get on with your life.
You will have more time to enjoy life!
“Don’t do something, stand there!” -Bogle