I'm trying to understand the upsides/downsides of investing to an index fund vs. investing directly to stocks of some best-known and well-established large-cap companies. Every single article on investment strategies says that for someone, who does not want to become full-time investor, the best thing is to invest in an index fund and wait 10+ years till your money grows. Let's compare some well-established large-cap companies' performance with performance of well-established index funds.
For instance, let's take average yearly growth percentage for the last 10 years for some companies:
- Apple - 28.09%
- Amazon - 33.32%
- Nvidia - 45.27%
- Microsoft - 26.66%
- AMD - 27.94%
- Mastercard - 31.34%
- Shopify - 44.50%
- Square - 32.19%
- MercadoLibre - 36.98%
- Netflix - 32.81%
Let's compare them to some well-regarded index funds:
- Vanguard U.S. Growth Fund (VWUSX) - 18.54%
- Vanguard Growth Index Fund (VIGAX) - 16.82%
- Vanguard Total Stock Market Index Fund (VTSAX) - 14.04%
- There is a huge gap between growth of the stocks vs. growth of the index fund
- Yes, I know that index funds are created by smart people/algorithms to be more reliable than usual stocks of several companies and they follow some particular indices for a reason.
- Yes, I know they include other stocks apart from the ones I mentioned above to balance the portfolio and defend against drops in price of the main stocks
- Interestingly, the lion's share of the cost of each of the growth index funds consists exactly of the companies I listed above
- Yes, I know that I included mostly companies from tech and finance sectors. But those are the ones, which are expected to grow best of all anyway, because the whole economy is driven by them. If the economy would collapse, then those companies would collapse with it and vice versa. I don't see any single chance that any other sector can in the nearest future outperform the tech and finance sectors, or that those sectors may fall much more than the rest of the businesses.
My question is: what would I get investing in much worse growing index fund vs. investing to some chosen well-established large-cap companies?