TLDR: Investing in individual stocks is not for everyone, why and why not

Anyone who is serious about creating wealth over the long term should invest in the stock market. period. As time and again it has been proven, over the long term (> 7 years) stock market produces some of the best returns historically. This is a phenomenon that has held true across markets, across time periods in general (Japan might be a notable exception).

Clearly the trend is clear across markets. But the basis of my post is not that.

Should you invest in individual stocks?

If you want to invest in Individual stocks, you should be able to do the following

Dedicate time - You need a lot of time to research the company, read annual reports, read AGM transcripts, understand the industry, compare against peers, determine the entry and exit price etc etc. This process is different for different people and it can take anywhere between a few weeks to several months
Understand finance - It is not an absolute necessity to be a CFA or CA or MBA but it never hurt. But you should be able to understand all the different financial terms relevant to decode the annual report / quarterly reports. Screeners can definitely help to create a short list. I like this screener - https://www.tijorifinance.com/
Investment plan - create an investment plan with all your analysis with a clear entry and exit criteria defined
Review - Semi annual review of the investment plan to ensure that the company is still within your parameters of the investment plan and there are no shift in fundamentals.
Have the right temperament - Individual stocks are much more volatile than an index, so you are likely to see moves in excess of 10% in a month. You should be able to stay the course without jumping in to exit a stock or average down when there is a crash without a basis tied to fundamentals

For a portfolio that you are planning to create for say 8 to 12 stocks, each stock needs to go through the above process to get to a yes or no before purchase. This is a lot of effort and most retail investors don’t have the time or don’t have the required expertise to do this work.

The alternative

The easier alternative for most retail investors is to stick to index funds. SIP / DCA and forget for the next 10 to 20 years. My recommendations here.

Index funds are a reflection of the economy in general
Cost efficient - as expense ratios are quite low (0.1 to 0.5%)
Stocks span multiple sectors
Automatically rebalanced
Poor performers are removed from the index on a semi annual basis
No thinking required

Conclusion

Back in the day when I was a complete investing novice ( I am not claiming to be an expert now) I did my fair share of trading mindlessly. I have covered some of this my investing journey post.

I have moved away from investing in Individual stocks almost completely (except for a few blue chips) to mutual funds, ETFs and index funds. I would recommend the same for most retail investors.

Good luck and Happy Investing

#MyFatFIRE