Michael Burry, known for his role in “The Big Short,” has recently shut down his hedge fund to launch a Substack focused on educational content. I appreciate his insights, as he bravely shares his opinions, even if I often find myself disagreeing or not fully grasping his references. In a recent post, he shared a “foundational” article intended to illustrate his thought process, beginning with a familiar statement:
For those skeptical of analog methods, since 1990, there have been over 750 changes in the S&P 500 Index. Google’s Gemini 3 Pro endorses this, as does Claude Max.
Both Gemini 3 Pro and Claude Max suggest that 45% of the top 20 companies in the 1999 NASDAQ 100 eventually went bankrupt or were acquired after experiencing losses greater than 75%. My conference room concurs with this assessment.
Capital is in continual rotation.
Therefore, you now understand that most investors might be better off focusing on index investing, rather than buying individual stocks.
If you’re young and have 50 to 70 years ahead of you, it’s advisable to invest primarily in common stock indices, ideally the S&P 500 or the Nasdaq 100—maybe even both. Embrace life, enjoy the outdoors, achieve tangible goals, automatically reinvest dividends, and allow the power of compounding to work in your favor. While it may not yield immediate results, this strategy often proves effective in the long run.
Naturally, some individuals simply prefer not to take the “easy” route.
For those people, their fortune lies in GameStop.
Burry proceeds to delve into his analysis of GameStop, showcasing how his skill and intelligence led to impressive returns on that trade.
This reflects the common humblebrag among professional investors: “You should invest in index funds, but here’s what I do instead.”
This also touches upon the universal dilemma faced by individual investors. If you are a dedicated learner in the investment field, you likely recognize that active trading may not be the best path. Yet, if you’re passionate about investing and willing to put in the work, you may feel you belong to a small group that can profit from active trading—smart enough to avoid the “easy” mode.
The problem with “easy” is that it often comes across as dull and slow-paced. Meanwhile, your Robinhood app or similar platforms readily offer:
- Cryptocurrencies, including memecoins with no real utility.
- Gambling, or “prediction markets,” related to this weekend’s NFL games.
- High-yield “dividend” ETFs boasting a 12% return that some believe will last indefinitely.
- High-risk options that could drain your funds within days.
- So-called “Boomer candy” ETFs promising the returns of stocks without any downside risk.
- Index “Plus” options. A sprinkle of extra features on your index fund! Just 25 basis points more!
I find myself spending a lot of time exploring these intriguing concepts throughout the investing landscape, constantly reminding myself to stick with the “easy” approach—essentially doing nothing repeatedly.
