Choosing individual stocks by individual investors is largely viewed as a thing from the past. Mutual funds made it so easy for regular folks to own well balanced, professionally managed portfolios that very few still choose to do it themselves. But some people do. I have met quite a few well educated and intelligent individuals who swore that their own portfolios of self-picked stocks had performed better than high ranking mutual funds with similar investment philosophies or benchmark indices.

Warren Buffett made his fortune by mostly picking individual stocks. But I firmly believe that choosing individual stocks should be left to professionals or only be done on a very small scale as a hobby or a game. If your livelihood or your retirement plans depend on how well your investments perform, in the vast majority of cases choosing individual stocks should be avoided. I realize that many will disagree with me on that issue, and I have heard their arguments, but here are my reasons to believe the way I do.

Surveys continually prove that, over the long term, professionally managed funds outperform anything an amateur investor can put together, although the opposite may well be true in a particular year or even a few. In fact, it is reasonable to expect that in certain periods certain stocks and certain sectors will perform better than a balanced portfolio. But the very fact that a portfolio’s return is higher than that of a balanced portfolio shows that it lacks negatively correlated stocks, bonds or cash. And this, in turn, means that when the situation changes, this portfolio will go down faster.

Emotional element also plays a crucial role. Over and over again, investors sell low and buy high. Even those who consider themselves sophisticated investors are only human, and humans tend to make irrational decisions when they see their life savings vanishing before their eyes.

Anybody can fix a car after browsing through a book and spending some time with it. But most people prefer to hire a licensed mechanic. First, it is cheaper in most cases to pay a mechanic for an hour of work than spend ten or twenty hours of your time. And second, if you make a mistake (you are not a professional after all) it may put your safety or even life at risk. Any handyman can lay wiring in your house, but you hire a licensed electrician for this purpose. Anybody can read a medical encyclopedia to figure out why a certain part of their body is hurting and try to self-medicate, but most of us prefer to see a doctor. Barring a few exceptions, a professional who has studied a subject for years and does nothing but a particular type of work will always do a better job than an amateur.

You may be an investment genius like Warren Buffett, but most of us aren’t. Don’t put your financial future at risk and leave stock picking to professionals.

Nikolay Sisan is a Certified Financial Planner and freelance writer in Vancouver.