One more word on ETFs
Following indices means ensuring that you are in the average, with all that that means. This can be a good solution if you don't want to rack your brains too much. Typically, in my case, I use them for gold and bonds. Both represent only a small part of my portfolio and I have neither the desire nor the skills to select stocks individually. ETFs allow me to obtain good diversification, with little cost, even on relatively small positions. It is therefore a good compromise. On the other hand, for Swiss and international stocks and real estate securities, I appreciate selecting companies directly. Of course, it is true that in theory there are only 10% investors who manage to beat the market. However, by choosing my stocks, not only do I have the satisfaction of carrying out research and becoming the owner of a great company, but I am also certain that my investment will correspond to my criteria, particularly in terms of dividend and risk.
There is another point that many investors do not know about index ETFs, which have become particularly fashionable since the 2000s. Since many individuals and institutions have decided to ensure the average (like at school), all their money has been poured into the securities that made up this reference. This has benefited first and foremost the best-known indices of each financial market, and therefore above all the large capitalizations. For example, SPY, one of the oldest, most known and most used ETFs, which replicates the S&P500. As its name suggests, this index includes the 500 largest US capitalizations. There are therefore more than 3,000 other US securities listed on the stock exchange that are not included. Although you can buy ETFs from all over the market, most investors limit themselves to the main indices. This means that small and mid caps are being shunned by the market, because of ETFs. As always, good ideas in the stock market always end up sawing off the branch they are sitting on. So it could well be that even the "mediocrity" approach will no longer work in the near future!
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When you say you are "researching", how exactly do you go about it?
This means searching for titles that match my criteria and analyzing them in detail.
About this, read the tutorial first: https://www.dividendes.ch/tutorial/
Dividinde also gives us some leads in his series of articles here: https://www.dividendes.ch/2017/05/identifier-des-actions-suisses-de-qualite-et-les-valoriser-16/
His criteria differ a little from mine but the idea is always the same: to base yourself on a few indicators with which you are comfortable, that is to say that you know well and which correspond to your investment philosophy.
Another negative side effect of index ETFs is to increase the degree of correlation of the underlying stocks. When institutions sell an ETF on the SMI en masse, for example, Nestlé, Novartis and Roche are sold automatically/simultaneously.
This is a "group shot" that creates a domino effect, which is very different from, for example, Novartis alone being sold massively following the presentation of poor results.
This increase in the degree of correlation makes the diversification of a portfolio much more difficult, especially, as you say, at the level of large capitalizations.
In summary: long live small and mid caps! 😉
It's clear!