Nine bloggers had a stock-picking contest for 2010. I decided to see how my actual portfolio would have fared in the contest.
If I had added an entry into this contest, it would have been the index-based part of my portfolio. It managed a 22.6% return for 2010 helped by a tilt towards small-cap stocks. Adding my indexed portfolio as an entry in the contest would have left me fourth out of ten with a 14% edge over the average of the other entries. However, when you add my not-so-great stock picks from the non-indexed part of my portfolio (which I'm slowly selling off), my 2010 return drops to 12.9%, which is still fifth out of ten and 4% above the average.
A result of fourth out of ten of is roughly what we should expect when comparing indexes to individual stock picks. The index will rarely be first, but it will be above average most of the time. Stock-picking contests are fun, but aren’t a great way to invest real money as the bloggers in the contest have said.