A friend who's just starting out investing and opened up their first brokerage account asked me the other day: How much should they be putting into single stocks versus ETFs that track the broader market?

It's a good question. Individual stocks, while riskier than diversified ETFs, have the potential for more explosive growth. With stories of retail investors striking it rich with stocks like Nvidia, Apple, Microsoft, and Palantir in recent years, trying your hand at stock picking is tempting.

Seeking an informed view, I asked a few financial experts what they think. Questions like these are always tough to answer in generalities — the right answer depends on someone's individual circumstances, goals, risk tolerance, and timeline. But even with the assumption that the investor is in their 20s and has a long time horizon, the answer was unanimous among the four experts I spoke with — It's better to just have your equity exposure in passive funds.

There are several reasons behind their advice. A big one is the amount of time it takes to research which stocks to buy.

"If you're starting to build a portfolio today, you're much better off focusing your time and energy and attention on your career and making money and putting more money away and just keeping it diversified," said Jason Browne, a Chartered Financial Consultant and the founder of Alexis Investment Partners. "In other words, make sure that you're participating in the growth of the stock market over time instead of spending your time trying to pick individual winners."

Then there's the competition, who you're buying and selling from: Wall Street investors, whose full-time job is watching the market.

"Competing with all those people down there, the tens of thousands and hundreds of thousands of people who have their eyes glued to the screen all day, figuring out how to make a buck," said Chris Chen, a Certified Financial Planner and wealth strategist at Insight Financial Strategists. "As individuals, it's very difficult to do that."

The odds of beating the market are also pretty low, no matter who you are. Even the Wall Street professionals, on average, don't have an impressive track record. Only 15% of large-cap funds have beaten the S&P 500 over the last decade, according to SPIVA data from December 2024. That number is about the same for the last three-year period. During 2024, only 34% of funds beat the index.

A 2024 study from Arizona State University professor Hendrik Bessembinder also found that around 51% of 29,078 US stocks listed since 1925 have lost value over the lifetimes with a median return of -7.4%.

Those numbers aren't exactly appetizing. But if you're still convinced you can pick winners, or at least want the thrill of trying, there are a few tips experts recommend keeping in mind.

First, — something like 5%-10%.

"When you're younger, you can take bigger swings," said Tyler Meyer, a certified financial planner and the founder of Retire to Abundance. "But generally speaking, I would stay away from more than 5% into individual investments."

Second, for picking your stocks. While it's probably overly time consuming to do the sort of financial analysis done on Wall Street, there are theories you can go off of, Chen said.

For example, you might consider the Dogs of the Dow theory, Chen said, which posits that the 10 stocks in the Dow Jones Industrial Average with the highest dividends in a given year are the cheapest in the index, and are therefore primed for outperformance in the following year.

Or you could wait for blue-chip stocks like Apple, Meta, and Alphabet to undergo and significant correction and buy the dip, Browne said.

"Every year for whatever reason they fall out of bed," Browne said. "You do have the ability then to add a little bit of value by just trading around the normal trading patterns of those names, because they are so volatile."

Another, less scientific option (but touted by investing icon Warren Buffett) is to buy what you understand. Business Insider recently profiled several everday investors who made winning stock picks based on observations in their day-to-day live.

Third and finally, .

"Statistically, that's when you're going to see the increases in stocks," said Melissa Cox, a Certified Financial Planner and the owner of Future-Focused Wealth. "It's not an overnight thing."