You Don't Need to Pick Stocks. You Need to Pick the Right Road.
Not everyone can pick the next Nvidia. Not everyone should try.
Individual stocks reward conviction but punish timing. One earnings miss, one CEO scandal, one sector rotation — and a position you held for two years vanishes in two days. Most retail investors know this feeling. The question is what to do about it.
The answer, for most people, is sector ETFs and broad index funds. Not because they are exciting. Because they are survivable. And in investing, surviving is the prerequisite for compounding.
Let us look at a real example of what happens when you pick a sector that looks promising but behaves like a trap.
The SPDR S&P Biotech ETF — ticker XBI — tracks an equal-weighted basket of U.S. biotech stocks. During the COVID vaccine boom, XBI surged to an all-time high near $174 in February 2021. Then it collapsed. By mid-2024, it was trading below $75. A 57% drawdown from peak to trough.
As of April 18, 2026, XBI has recovered to roughly $139. That is an 83% gain over the past twelve months. Impressive. But it is still about 20% below its 2021 all-time high. Five years later, and a buy-and-hold investor from the peak is still underwater.
Now here is where the real lesson lives.
If you thought biotech would fall and bought the 3x inverse biotech ETF — LABD — you experienced something far worse than a bad trade. You experienced structural destruction.
LABD has undergone four reverse splits, the most recent being a 1-for-10 reverse split on September 29, 2025. A reverse split does not create value. It is a mathematical reset that happens when a leveraged ETF's price has decayed so far toward zero that it becomes functionally untradeable. Direxion, the fund's issuer, confirmed this split in an August 2025 press release.
This is the core problem with leveraged ETFs. They deliver 3x the daily return, not 3x the cumulative return. Over time, volatility causes decay. A 10% drop followed by an 11% rise does not get you back to even on a 3x product — it leaves you further behind. The math is relentless and it compounds against you.
The bull side is not safe either. LABU — the 3x long biotech ETF — also executed a 1-for-20 reverse split in December 2024. Even when biotech recovered 83% in a year, the leveraged product's history is littered with reverse splits that destroyed early holders.
This is not a biotech-specific problem. It is a leverage-specific problem. We have written about the same dynamic in quantum computing stocks, where the 3x Long IonQ ETP on the London Stock Exchange was forcibly delisted after losing over 30% in a single stretch. The pattern repeats across every leveraged product in every volatile sector.
So what should you own instead?
If AI continues to reshape every industry — and the data strongly suggests it will — then the question is not which AI stock will win. It is which basket captures the winners without exposing you to the losers.
Two ETFs have answered this question for decades.
SPY — the SPDR S&P 500 ETF — tracks the 500 largest U.S. companies. Since 1957, the S&P 500 has delivered an average annual return of approximately 10.5%, according to Investopedia's analysis of historical data. The 10-year average annual return for SPY is 15.01%, according to FinanceCharts. In 2024, SPY returned 24.89%. In 2025, 17.72%.
QQQ — the Invesco Nasdaq-100 ETF — tracks the 100 largest non-financial companies on the Nasdaq, heavily weighted toward technology. Over the past 10 years, QQQ has delivered an annualized return of 20.22%, compared to SPY's 14.95%, according to Stock Analysis. In 2023, QQQ returned 54.86%. In 2024, 25.58%. In 2025, 20.77%.
The difference is concentration. QQQ gives you heavier exposure to the companies building and deploying AI — Microsoft, Apple, Nvidia, Google, Meta, Amazon. If you believe AI is the defining economic force of this decade, QQQ captures that thesis without requiring you to pick which company wins.
SPY gives you broader diversification. It includes healthcare, financials, energy, industrials — sectors that may not lead the AI revolution but will not go to zero if tech corrects.
Both are survivable. Both compound. Neither requires you to guess which single stock will outperform next quarter.
Here is what we think. If you find individual stock analysis overwhelming, index ETFs are not a compromise. They are a strategy. QQQ for conviction in AI and tech. SPY for broader safety. Dollar-cost average into either or both. Do not use leverage. Do not take loans. Do not try to time the entry.
The road matters more than the car. Pick the right road, stay on it, and let time do the work.
Our view — same as always. Cash in a 3.5% money-market fund is a position, not a failure. If you choose to invest, dollar-cost averaging into QQQ or SPY removes the pressure of timing. The goal is not to find the perfect entry. The goal is to still be compounding ten years from now.
Related Posts:
