Should I buy a FTSE 100 index tracker or pick stocks in this bear market?

first_img Enter Your Email Address Simply click below to discover how you can take advantage of this. G A Chester has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. “This Stock Could Be Like Buying Amazon in 1997” Should I buy a FTSE 100 index tracker or pick stocks in this bear market? Our 6 ‘Best Buys Now’ Shares I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. 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G A Chester | Sunday, 24th May, 2020 I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Here at the Motley Fool we’re great advocates of long-term investing in the stock market. This is because markets like the FTSE 100 index have a long history of outperforming other popular asset classes. In the short term, equities can be volatile, but in the long term, they’ve proved to be the best way of growing your wealth.The FTSE 100 is currently in a bear market. This is when the index is trading in excess of 20% below its previous high. The corollary is, now’s likely to be a great time for investing for the long term. But should you buy a simple FTSE 100 index tracker, or pick individual stocks?5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…FTSE 100 index tracker vs stock-picking right nowAll of us at the Motley Fool believe bear markets represent an opportunity for investors. However, you’ll find a range of views on the best way to play the current opportunity.My colleague Malcolm Wheatley says: “Now is not the time for highly concentrated portfolios. It’s time for broadly based portfolios.” He’s also advised: “Take a long hard look at what you own, and ask a question that’s all too-rarely asked. Not: ‘What do I own?’, but ‘What don’t I own?’”Meanwhile, my colleague Kevin Godbold says: “It’s a stock-picker’s market.” He’s named a range of sectors he wouldn’t touch with a bargepole and the top five sectors he reckons are “well-stocked hunting grounds.”A FTSE 100 index tracker is a ready-made example of a broadly-based, diversified portfolio. And, of course, Kevin’s concentration on a more limited universe is the very essence of stock-picking. Let’s look at the strengths and weaknesses of each approach?FTSE 100 index tracker pros and consA FTSE 100 index tracker gives you an instant portfolio of 100 companies. Many are multinationals, providing wide geographical diversification. They also represent a wide range of industries. A FTSE 100 index tracker guarantees you a return that matches the index (less a small annual management charge).Critics bemoan the fact its return is heavily skewed by the index’s biggest companies, and that it provides no exposure to medium-sized and smaller businesses. Its under-representation of world-class technology giants is another criticism.However, there’s no rule saying you can only own a FTSE 100 index tracker. For example, you could also invest in a mid-cap FTSE 250 tracker and a tech-rich US tracker to increase your diversification still further.Stock-picking pros and consPicking a portfolio of individual stocks offers the potential to make a higher return than the broad market. Even a small annual out-performance over long periods, such as 40 years, can make a big difference. For example, £10,000 in a FTSE 100 index tracker, at its long-run real return of 5% a year, would grow to around £70,000. With a 1%-a-year outperformance it would rise to over £100,000. And if you managed 3%, you’d be comfortably above £200,000.In the absence of an inordinate amount of sheer luck, you need to put in more time and effort to be a successful stock-picker than to invest in an index tracker. Even then, there’s no guarantee you’ll outperform the market.However, the lucrative rewards, if you do, mean many investors find stock-picking attractive. Here on the Motley Fool website, you’ll find plenty of news and views on individual stocks, as well as trackers, to help you take advantage in this bear market — whatever your strategy. See all posts by G A Chesterlast_img read more