P.S. Here's an exercise that's worth trying, provided you actually try to dig out for yourself the names of some stocks that "everyone" thought were great ten years ago. NOT the stocks that everyone thinks are great today--the reason everyone thinks they're great is that they have
done well recently.
Then, following the directions in http://www.bogleheads.org/wiki/How_to_u ... wth_charts
, start by plotting the Vanguard 500 Index Fund (because that will get us back to about 1976 and also force Morningstar to plot the S&P 500). Now, in the "compare to" box, start typing the ticker symbols of the individual "great" stocks. That will plot growth charts for the stocks--total return, including dividends--along with the 500 Index. I think you'll see quickly how much dispersion there is, and how much luck is involved in picking stocks if you only pick a few.
For example, in 1999, Glassman and Hassett published a book entitled Dow 36,000, in which they proved mathematically (or thought they did) that the Dow had to reach 36,000 by 2005 at the latest. They also had some chapters of investing advice, including some stock picks, based on the valuation methodology of Elliot L. Schlang, whom they thought highly of and called "genius of Cleveland." They identified "three [stocks] that illustrate the Dow 36,000 Theory in practice." They were Tootsie Roll, General Electric, and Microsoft. (By the way, General Electric is a good example of a company that was thought to be an absolutely safe sure thing, with no need for further diversification because it ran so many different businesses, and every single GE business was among the top three in its category).
I don't know about Tootsie Roll, but in 1999 I think anyone who believed in "great companies with great stocks" would have said that GE and Microsoft were absolutely safe bets.
Here is how investments in these three individual stocks would have fared, compared to the index fund:
The index fund actually beat all three of their picks. One might charitably call Tootsie Roll a tie, but by investing in GE or Microsoft instead of the index fund, you did yourself meaningful damage. That's not always the way it works--sometimes individual stocks significantly outperform the index. The point is that picking stocks is not a slam dunk even if everybody says the companies involved are great companies.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.