I have a confession to make: I own a stock - Netflix. I’m confessing because I’ve come to the conclusion that investing in individual stocks is a bad idea for most people. Let me back up a step.

About 12 years ago I started learning about investing. I quickly became interested in the subject and read everything I could find on it from books by Peter Lynch and Ben Graham to periodicals like the Wall Street Journal and Investor Business Daily. I became active on the Motley Fool community and even joined the company. Over time I found myself spending hours and hours researching stocks in my spare time and making investment decisions. I had some spectacular winners such as Starbucks and Celera and some equally spectacular losers such as @Home.

About 3 years ago I forced myself to answer a tough question: am I any good at this? To be clear, I’ve never been a trader or bought anything without learning everything I can about the company. Based on discussions with other people over the past decade I’ve concluded that I know much more than most people on the subject. But facts are facts, and I decided the only way to answer this question was to go through the painful exercise of calculating my returns relative to the S&P 500.

The answer? No, I am not. Well, at least as compared to a monkey picking random stocks from the newspaper. I suppose compared to most investors I’m actually doing well: the net result of my 7-8 years of investing in stocks got me a return equal to the S&P 500 Index over that period. That’s a lot of work for no “Alpha” as we say in the financial world, but at least I’m faring better than the day-traders and most mutual fund buyers.

As a result of this exercise I decided to shift to an asset-allocation strategy using ETFs. I’ll try to cover more of my current approach in a later post, but the point of this discussion is that my current strategy dictates that I no longer invest in stocks.

Today I read another brilliant article by William Bernstein that confirms my observations and validates my decision. In his usual, eloquent style Bernstein explains why you probably shouldn’t be buying stocks either. Don’t fell badly, though. He also makes a pretty strong case that 99% of the “pros” on Wall Street should join us.

If you want some great information on what we should probably be doing, I suggest Bernstein’s books - particularly the Intelligent Asset Allocator - or David Jackson’s ETF Investing Guide.

I suppose you’re going to make me publicly explain why I’m ignoring my own cold, hard, factual history and answer your question: “Why are you investing in Netflix?” My answer is that I invest a LOT of time studying the stock and company. I read about it daily, research the industry, and talk to everyone I can find about it. Netflix also has a very transparent, consumer-facing service, so evaluating their product offerings is relatively easy. The net result of this exercise is that I feel comfortable with a small % stake in the company.

Only time will tell if this was a profitable decision, but I’ll sleep easy knowing that my downside is minimal and that I knew the risks in advance.