Clark’s Take: Should You Invest in Stocks at All?

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Money expert Clark Howard isn’t a fan of investing in individual stocks.

Clark thinks putting an outsized percentage of your portfolio into a few individual stocks is unnecessary for the typical investor.

However, Clark allows for some nuance depending on your personal risk tolerance and strategy. He differentiates between more and less risky investment strategies involving individual stocks.

In this article, I’ll go into more detail about why he thinks placing concentrated bets on individual stocks is an unnecessary risk for most people.

Table of Contents

Should You Try To Beat the Market?

There’s only one reason to invest in an individual stock: You believe the stock will outperform the market. In this instance, “the market” typically refers to an S&P 500 or total stock market index fund.

Even if you believe that one or more individual stocks will beat the market, for most people, putting any substantial amount of your portfolio into a single company is an unnecessary risk.

Clark consistently advises people to invest in the future of capitalism rather than in the future of individual companies.

“Buying individual stocks is not necessary for the typical investor,” Clark says. “People try to do it because they think they can beat the market. I find it very hard to beat the market.”

Clark has long been an advocate for investing in target date funds or low-cost index funds. Target date funds will get you plenty of exposure to equities (stocks), especially if you’re far from retirement. But with those choices, the value of your overall portfolio won’t change dramatically based on the performance of a single company.

With the right approach, it isn’t necessary to beat the market. The textbook successful retirement savings plan involves a disciplined, consistent approach for decades while minimizing risk and expenses.

Most actively-managed funds underperform the market in the long term – even when those funds are run by full-time managers who have extensive experience and training.


Self-Assessment: Investing Skills You Need To Beat the Market

Beating the market often requires taking more risk, although it’s possible to do by diversifying your portfolio beyond a total stock market index fund.

If your plan is to track the market with your investments, it takes very little skill. But if you’re trying to beat the market by buying stocks, you probably need all of the following skill sets and more:

  • Emotional stability. Respected investor Benjamin Graham invented the concept of “Mr. Market.” This hypothetical investor makes decisions based on his mood. In times of market euphoria, Mr. Market buys. In times of market despair, Mr. Market sells. But that often turns out to be the exact opposite of the optimal approach. It’s surprisingly easy to let emotions get in the way of optimal decision-making.
  • Market knowledge. Generally, the way to avoid making emotional decisions is via a high level of conviction. That sort of conviction shouldn’t be based on blind faith. It typically depends on a deep understanding of the market (or specific stocks and companies, in the case of the topic in this article).
  • Patience. Even if you’re able to beat the odds and outperform the market in the long term, there most likely will be periods — sometimes years at a time — when your performance lags behind the market. You need the ability to wait out those times despite the uncertainty of the future.
  • Ability to avoid expenses. Buying individual stocks can be free, depending on which investment company you use. However, if you’re doing even a moderate amount of buying and selling, over time, the tax bill you’ll generate will require you to beat the market by a decent margin just to stay even with a total stock market fund. You’ll also need to be smart about tax-loss harvesting.

Clark: Understand Your Motivations and Priorities

Clark always emphasizes that saving for retirement should be your greatest priority as an investor.

However, Clark thinks too many people who buy stocks are in it for sport, trying to make money on short-term trades. He sometimes compares that to gambling in a casino.

“My whole thing is, what are you really trying to accomplish?” Clark says.

“If you’re trying to play sports, go play sports. If you’re trying to create financial security for your long haul, that’s a different thing. And I know that’s so harsh, what I just said. I’m not opposed to people buying individual stocks. I just think it’s not smart.”

He points to the proliferation of people posting investment advice on TikTok as well as the GameStop short squeeze that happened in January 2021, fueled to a large degree by a group of traders who congregate on Reddit.

Stock Investing: Consider “Core and Explore” Philosophy

If you’re dead set on buying individual stocks, the “core and explore” philosophy popularized by Charles Schwab may be a good way to go.

Clark explains the concept: “First, you take care of the basics by having a target date fund or a mix of index funds. So that you know through thick and thin over the decades, you’re taking care of the base of what you’re trying to develop for the future.

“And then once you’ve built that core, if you want to do more and you’re bored and you want to buy individual stocks, go for it.”


In other words, with this strategy, you follow Clark’s primary advice with the majority of your portfolio, by investing in a target date fund or index funds. Then you sprinkle in some individual stocks with a much smaller percentage of your portfolio.

Stock Investing: The Value of Diversification & Importance of Holding

It’s incredibly risky to invest the majority of your portfolio into just a few stocks, no matter how “blue-chip” the companies may be, Clark says.

If he had to build a portfolio entirely of individual stocks, he says he’d invest in at least 50 different ones.

“The more narrow you are with your portfolio, the more you raise the risk that an unexpected movement in a single holding could dramatically affect your financial security,” Clark says.

“You’re making a concentrated bet on something like Apple because you might love the product. You believe in the company and you think it’s going to the stratosphere. But the reality is you’re taking on too much risk at that point.”

Clark also thinks a way to reduce the risk in a portfolio that’s heavy on individual stocks is to buy value stocks and then hold them for a really long time.

He recognizes that’s not an opinion everyone shares these days. “Warren Buffet, to young investors, is like somebody who might as well be Abraham, Isaac or Joseph at this point,” Clark says. “Because his returns have not been recently like they were in the past. So people are like, ‘Oh, well that’s old school. Why would somebody buy something and hold it forever?'”

But if a stock is trading for less than its intrinsic value, the best way to realize that inefficiency usually is to hold it for a long time. Not incidentally, holding investments for decades also helps limit your taxes and fees.

Final Thoughts

Investing is very personal. You are the only person who can decide what’s best for you.

But if you want to give yourself the best odds of being financially self-sufficient during retirement, it’s optimal to lower your risk, increase your diversification and limit your fees.


There are plenty of ways you can find to take risks in your life. But when it comes to investing for retirement, there’s nothing wrong with a safe, boring strategy that yields average returns.

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