I Pick My Own Stocks. Is It Working vs an Index Fund?
If you hold 15 to 40 individual stocks, two questions matter: are you beating a fair benchmark after costs, and how many real bets do you actually have? Here is how to answer both with your own numbers.
Key takeaways
- Compare your time-weighted return, after fees and with dividends, against an index of similar risk over at least three to five years. Trailing is common: 79% of active large-cap funds trailed the S&P 500 in 2025 (SPIVA).
- Twenty-five stocks can be five bets. Chip-equipment makers Applied Materials and KLA moved with a 0.93 correlation over five years in Exent’s data.
- In 144 anonymized portfolios uploaded to Exent, the median held 15 positions but had 77.2% of its money in the top five.
- Count your winners and laggards. Only 36.0% of today’s 500 largest US stocks beat the S&P 500 over the last 10 years, so a few picks usually carry the result.
How do I know if my stock picking is actually working?
It is working if your return, measured properly, beats a fair benchmark over several years. Three details decide whether the comparison is honest. Use time-weighted return, so deposits and withdrawals do not distort the result. Include dividends on both sides, because the S&P 500’s total return includes them. And subtract everything you pay: trading costs, newsletter fees and taxes on short-term gains.
Then give it time. One good year proves little. Our guide on how to calculate your portfolio return covers the math, and skill vs luck in returns explains how long a record needs to be before it means something.
For perspective, professionals struggle too. S&P’s SPIVA scorecard found that 79% of active large-cap US funds trailed the S&P 500 in 2025, after fees.
What should I compare my stock picks against?
Compare against an index with similar risk, not only the S&P 500. A portfolio full of growth and chip stocks swings more than the index. In a strong decade it should earn more simply for carrying that risk. A risk-matched benchmark asks whether you earned more than an index fund with the same volatility would have.
| Jul 2016–Sep 2026 (backtest, monthly) | Annual growth | Volatility | Largest drop |
|---|---|---|---|
| S&P 500 (SPY) | 15.2% | 15.2% | −23.9% |
| Nasdaq‑100 (QQQ) | 21.5% | 18.8% | −32.6% |
| Illustrative stock picker | 17.0% | 22.0% | −38.0% |
The illustrative picker beat the S&P 500 by almost two points a year, yet took more risk than the Nasdaq‑100 and earned less. Against a fair benchmark, that is not a win. The two index rows are backtests on monthly data; see the Nasdaq‑100 strategy page.
How do I count my winners and laggards?
List every position with its return since purchase and the S&P 500’s return over the same dates. Then count. Most stock pickers find that two or three names explain most of the gain, and a long tail lags the index.
That pattern is normal. Over the 10 years to September 2026, 152 of 422 (36.0%) of today’s 500 largest US stocks beat the S&P 500, and the median one returned 239% against 311% for the index. The useful question is whether your laggards still have a reason to be there. If you would not buy one today, write down why you still own it. See how to find portfolio laggards.
What to check this weekend
- Your time-weighted return over three and five years, after all costs, next to SPY and QQQ total returns.
- Your portfolio’s volatility and largest drop, compared with the benchmark you chose.
- A winners-and-laggards list: each stock’s return since purchase vs the S&P 500 over the same dates.
- Your themes: group holdings by what drives them (chips, software, banks, energy) and total each group.
- Your largest position and largest theme as a share of the whole.
- One sentence per holding on why you own it today.
How to score your stock picking with Exent
- Upload a screenshot or file of your holdings (CSV, Excel, PDF or Google Sheet); no brokerage login.
- Exent compares the portfolio with a risk‑matched benchmark and shows Sharpe, Sortino and drawdown next to the index.
- It groups stocks that move together into correlation clusters and rates each holding in a scorecard (Wealth Generating, Wealth Preserving, Prospect, Risky).
- For each holding, see what top‑rated Wall Street analysts and company insiders have been doing.
Frequently asked questions
Compare your time-weighted return after all costs with an index fund of similar risk over at least three to five years. If you trail it consistently, the index fund would have done more for less work.
Only if your portfolio carries similar risk. A growth-heavy portfolio is better judged against a risk-matched benchmark or the Nasdaq-100, because extra risk alone should earn extra return in rising markets.
There is no fixed number, but beyond 20 to 30 names many investors stop following each one closely. The number of independent bets matters more than the ticker count.
Yes. If many share one theme, such as chips or software, they tend to fall together. Some chip-equipment stocks moved with correlations near 0.9 over five years in Exent’s data.
In Exent’s data, 36.0% of today’s 500 largest US stocks beat the S&P 500 over the 10 years to September 2026. The count includes only survivors, so the true share was lower.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.