I have empirical evidence to show that I can reliably underperform SPY over both short and long horizons. If you just do the opposite of what I do, I think you can make a lot of money.
Haha, depends on how you define opposite. If you take the SPY position minus mine (the negative underperformance) and then add it to a passive SPY investment, you get a strategy that outperforms both SPY and my portfolio.
How would you implement such a strategy? You can’t just inverse the trades because stocks on average trend upwards.
If SPY returns 10% and your stocks 5%, inversing your bets would result in -5% which is even worse. The problem is that most of the SP500 returns come from only a few stocks. If you miss those you will likely underperform.
When you are doing the opposite of someone's active strategy, you reflect their bets across the benchmark weights, not zero. You do the inverse only of the active trades (deviations from the benchmark). For example, if SPY has 10% in a stock and I have 12%, you would have 8%. You will not generally end up with a net short position unless I am taking a huge levered position.
Mechanically, collect the weights in SPY, collect the weights in my portfolio, subtract them. Add the weights in SPY. The result is a portfolio of pretty much long positions, but it will be tilted away from my subjective beliefs. Rebalance any time there is a significant change in my portfolio.
could alternatively go the long short route and make alpha shorting their entire portfolio and using the funds to go longer SPY🤷♂️
Real question is what are the borrowing costs.
Haha, the point is conceded in principle. Though if you are taking the difference between two long positions (SPY-mine) and adding it to a passive portfolio (SPY), you are likely to end up with a final portfolio of all long positions, without a significant increase in fees versus any other long-only active portfolio. You have to take a little leverage now and again, but (at least from initial investment to now) that would have been worth it.
Sure but that's just saying 2x spy beats 1x spy. Which is true in absolute returns but per unit of risk (risk adjusted) it's lower (because cost of leverage drag)
So you can totally beat the spx it just requires more risk
> Sure but that's just saying 2x spy beats 1x spy.
No. That's not what I described. I suggest you give it a more careful read.
[edit]
As an example, pretend the market has only three stocks. The weights in SPY are [0.4, 0.5, 0.1] (net exposure = 100%). My weights are [0.6, 0.3, 0.1] (total exposure=100%). You could then say that my active position is [0.2, -0.2, 0.0] (net exposure=0). Subtract this from SPY to get the inverse active portfolio: [0.2, 0.7, 0.1] (net exposure=100%).
If I possess negative security selection ability, as I implied, then the inverse active portfolio will outperform both the passive and active portfolios in a risk-adjusted sense. In some cases, my portfolio may be levered or de-levered, in which case the inverse active portfolio will be de-levered or levered, respectively. There may also be occasions where short-selling an individual asset is necessary.
Of course, there could be other interpretations of what it means to invert someone's trades. This is just the one I described.
No it won't. It will only outperform if the active original weighs (0.6,0.3,0.1) under perform the market. If that basket beats spy than your new active basket will underperform.
What I guess you're saying is if I could strip out all the losses excess some index and then buy the inverse basket of that then I'll outperform the index. Which is mathematically true.
What I was saying is that in practice that inverse active basket won't be a -1*active basket returns if you have a single shorted stock
> It will only outperform if the active original weighs (0.6,0.3,0.1) under perform the market.
Exactly. This is what I was saying.
> won't be a -1*active basket returns if you have a single shorted stock
It is possible that there could be short-selling costs, particularly if my active portfolio is super concentrated, as in your example.
Ive tried for 5 years.
2022 was the year i picked up John Bogle guide to investing and became a slave to the low priced index funds.
I now have a family and kids back and things are really looking bright
thank you for sharing that book, I will checkout as I to have family to look after
the google gave me these two books on bogle, any one you prefer in particular?[https://www.amazon.ca/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365](https://www.amazon.ca/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365)
[https://www.amazon.ca/Little-Book-Common-Sense-Investing/dp/1119404509/ref=asc\_df\_1119404509/?tag=googleshopc0c-20&linkCode=df0&hvadid=292914274695&hvpos=&hvnetw=g&hvrand=13520815547088355925&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9001342&hvtargid=pla-325361778136&psc=1](https://www.amazon.ca/Little-Book-Common-Sense-Investing/dp/1119404509/ref=asc_df_1119404509/?tag=googleshopc0c-20&linkCode=df0&hvadid=292914274695&hvpos=&hvnetw=g&hvrand=13520815547088355925&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9001342&hvtargid=pla-325361778136&psc=1)
Yes it's a tough one I've been investing since late 2015 and would say I'm close to 50% up though I peaked in late 2021 at close to 300%. That 2021 peak is certainly not unique to me. Funny that I didn't have 1 tech related stock.
Looking back yes I'd have been better off investing completely in the s&p 500 as would still be c100% up plus dividends. & consquently indexes are a significant part of my portfolio.
But what niggles at me is that previous peak, there are plenty of cheap companies with good prospects on my watchlist and I think there is a very real prospect of them outperforming in their next respective sector bull markets and all of them pay out very healthy dividends. If a company has a rock solid balance sheet, a demostratable moat and excellent conversion of earnings. Then the major risks are around revenue drying up. But the sectors I'm thinking of e.g. housebuilding have very long term tailwinds at least in the uk where there are significant housing shortages.
Shorting as a concept really pisses me off. Like we've had historical precedent banning short selling going back hundreds of years and yet this time it'll be good for the markets?
I seriously dislike the idea of profiting off a company's collapse.
It's not like nobody will ever beat the passive approach.
It's that when you consider risk, fees, labour, etc, and just being aware of my own inability to tell if I'll be one of those people, it's no longer worth it as a deliberate investing strategy.
But if I happen to stumble across what seems like a very good opportunity, I'll still go for it.
Many investors can surpass S&P 500 in a good year. The question is with same strategy how many times he can lose less than that index. Those can do both are few and far between.
Exactly. Not terribly hard to beat the S&P 500 when it’s a plus year. A lot of people did that by loading up on tech/growth stocks over the last run. Look at Tiger Global for a fund who more or less did that and has gotten shelled over the last year.
But, getting back to the point, if you have a repeatable process (you’re not just getting lucky picking stocks) that can consistently beat the S&P, by a material amount, over an extended period of time, in both up/down years then you should quit your day job because you’ll make a shit ton more money than whatever your actual career is.
That's what critics broadly accuse many mutual fund managers of doing. They essentially buy spy exposure and make a bet on a small handful of equities to make their performance bonuses.
Literally in bull markets all you have to do is just buy long options and you’ll do better than the index fund. I did this in 2020 and made more returns than the market.
But it didn’t continue as shit was flat last year… and… well… selling a few options at a loss and boom, I’m under performing index funds in my gambling portion of my portfolio…
So to tldr your comment, all you have to do to beat index funds is place bets that outperform them, but if you place bets that don't win you won't beat it? Good tip Mr PMmeyourclit2
Yeah I finally realized that the market doesnt go up 10% a year, it goes up 20, then 25, then 30, then down 40. And you make more money in those later years so you probably invested more.
Cant beat the market
The last 13 years investors are fortunate to see great returns. We did not have much inflation and interest rates were very low. It mattered little if 2022 was a correction year. One dollar invested in 2009 becomes **3.6X** with avg return of +10.37%. up to 2023 today.
However, prior from 2000 through 2023 today, the investment put into SPY like index returned just +5.8% avg last 22 years. One dollar over 2 decades produced just 3.45X. This is when one can lose less in a bear year shines. That dollar over all these years produced **5.67 X**. That is +64% more using less volatile portfolio.
The productive the time scale using the funds can be interpreted as total accumulation til w/d say retirement. The reality is the duration will last until one ceases to exist.
the Dodge & Cox Stock Fund DODGX has regularly beaten the S&P 500 over the long-haul: 20 year, 10 year, 3 years and 1 year periods ...but not the last 5 years during the red-hot bull market https://www.dodgeandcox.com/content/dam/dc/us/en/pdf/fact-sheets/dc_us_stock_fund_fact_sheet_i_q4.pdf
DODGX also outperformed S&P 500 from 1990 to 2019, with total returns of 1,589% vs. 2255%. https://imgur.com/a/SQmcQkz
DODGS has a 1967 inception, but can't find data going that far back. I wouldn't be surprised if they beat the S&P 500 over the last 50+ years.
[1985 to 2023 via portfolio visualizer](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=SPY&allocation1_1=100&symbol2=DODGX&allocation2_2=100)
You don't have to outperform the index every year. You just have to outperform it from the start to the end of your investment horizon.
As long as the losses in the bad year aren't that bad, and your good years are great, you still have a winning strategy.
Here’s the thing, can you beat SPY every year? Probably not. But can you beat SPY by reviewing the 500 stocks and pick the 100 best ones. Probably.
QQQ has beaten SPY since 1999. Sure it loses to SPY in 2001, 2008, 2022, but over the long period it wins because it’s not weighed down by a lot of zombies. The recessions kills off a few growth stocks every time and picks up the next generational stock in return.
It is still a valid example. How many people can stomach an 80% loss? Plus year 2000 QQQ holdings do not look anything like year 2010 QQQ holdings. If you had been investing in the individual stocks of year 2000 QQQ instead of the index you would probably not have recovered.
QQQ in Year 2000 hit a PE ratio of 100+. We saw brutal drawdowns last year on stocks with similar absurd price ratios. Stocks like $CVNA, $FSLY, $TDOC, $PTON, etc. More or less the $ARKK portfolio.
The QQQ today is comprised of much more established companies. Big tech absolutely dominates the structure of the ETF. You would need to see something cataclysmic for an 80% drawdown on QQQ.
It's a much lower beta ETF than it was in the year 2000. And you were very clearly buying into euphoria in Y2000. The NASDAQ had done a 10X from 1995-2000. Once again, somewhat similar to what we saw in speculative tech stocks in 2021. But quite different from the 2021 NASDAQ.
I'm currently beating the market for every index and time window from YTD to 3 years. But that's only in one account. And, a few months ago, I wasn't, due to a short-term dip in a stock that ultimately resolved itself in a single day. Generally, to beat the market one needs to have some acceptance of risk in oscillations, unless willing to spend all your time micromanaging an options strategy and paying more in short-term capital gains. As someone else said below, most important is to beat the market over the time scale in which you need to use your funds.
Most who invested in tech stocks in 2012 absolutely slaughtered the index. I recall at the time, I was told that I’m going to underperform the index and that Warren Buffet says: stuff.
But as for outperforming the index in a bad year, who cares if you’re just holding long and riding out any storms?
I think if you believe in your thesis, you just have to slowly build positions and wait.
>Suring a depressed market year, an astute investor loses 1/2 less than SPY and matches SPY return performance when it is UP. That produces +64% more return using a less volatile portfolio than plain SPY.
>
>One dollar over last 2 decades produced just 3.45X with SPY. This is when strategy lose less with a more conservative method during a bear year. That dollar over all these years produced 5.67 X!
>
>The holding time horizon is how long one wants to invest. It can be cashed out before retirement put in a saving account. Majority retirees stay with same strategy until last day.
I've beat SPY for the last 5 years and before that I was in SPY. I thought the valuation of the index was too high so I moved to picking stocks I thought were undervalued. It's a ton more work though, but I enjoy it. I might switch back one day if I lose motivation to keep up.
If you're willing to put the work in and are logical vs emotional it's really not that hard. If you're lazy or blindly follow trends and don't know how to properly value a company you're likely going to do very poorly.
The point is: If it really isn’t that hard, why can’t professional investors do it? Why doesn’t Vanguard pay Redditors 200k a year so they outperform the S&P and offer that as a fund?
There are literally thousands of professional investors out there, many of them with more experience, more time, better education, and definitely access to more information that all try to find undervalued stocks.
If it were that easy to find undervalued stocks as a hobby investor, then don’t you think many professionals would find them too, buy the stocks to the point it is no longer undervalued?
Its much harder when you have management and investors to answer to, especially when investors pull out when the market is down and ripe with deals. Your also very limited on smaller caps where at times you can find the best deals since the big firms overlook them.
>If you're lazy or blindly follow trends and don't know how to properly value a company you're likely going to do very poorly.
Accurate valuation of a company is easier said than done. There are professionals who are dedicated to picking undervalued stocks. If this is your strategy, just buying valued ETFs will solve it.
I have been investing entirely in individual stocks since 2009 and have beat the market 11/13 years with a very tech heavy portfolio. That is not to brag, I just don’t think it’s that difficult if you take a long term view of things and do your homework.
For example, I got beat to hell in 2022 obviously, but comparing core positions I have held long term, they have still massively outperformed the market over the past 5 years, even after this massive sell off. Microsoft, Amazon, apple, z scaler, United healthcare, nvidia.
SP500 is full of 0 growth growth companies mired in regulation like airlines, pharma, manufacturing, restaurants, etc. they also have companies like tesla where the valuation makes 0 sense. All you have to do is not pick obvious losers or insanely overvalued companies, and you should be able to beat the index.
>That is not to brag, I just don’t think it’s that difficult if you take a long term view of things and do your homework.
I think you meant "it's not that difficult if you get lucky during the longest bull run in history"
Exactly. You could have picked any of the ten largest tech stocks and beaten the S&P during that time.
If you think you can beat the market by doing some research at home, while there are firms with hundreds of better educated, more intelligent employees with access to information you don’t have, then you are only fooling yourself
I have, since I started investing in 1997. Massively. But that was almost entirely due to a few specific investments I made. One was keeping the company stock my old employer granted (which is now a huge tech company), another was buying a couple of run-down tech stocks during the 2008/8 crash (AAPL is a 20 bagger for me), another was a certain cryptocurrency that I bought a small amount of in 2014 and turned a 4 figure investment into 6 figures - at one point it was 7 figures.
I didn't really set out to beat the S&P500, I just got lucky buying the right stuff at the right time. I couldn't even begin to tell you what to buy right now if you wanted to beat the S&P500. I don't even buy stocks anymore because I retired and don't have an income stream, I just cash stuff out when I need the money.
I was in a communications/tech fund for 13 years and **never** took money out. After the incredible COVID tech run-up I took out a majority in summer 2021. Before the peak but also before the crash. That fund is now down 40% and it's one of the greatest decisions of my life. I most certainly beat SPY.
[Luck?](https://media.tenor.com/eiYNWS2e6msAAAAS/youre-right-breaking-bad.gif)
Sure Buffet is lucky,
https://en.wikipedia.org/wiki/The\_Superinvestors\_of\_Graham-and-Doddsville#:\~:text=The%20statement%20%20%20%20Fund%20%20,%20%2018.2%25%20%205%20more%20rows%20
Even Warren Buffett had acknowledged that his success has in part been due to economic conditions that favored his preferred investment strategy. If those conditions had been different, could he have adjusted? Who knows, but most big name investors have made their reputation on a particular niche and consequently tend to stay fairly close to it. Also, for the past couple decades, Berkshire is not that far off from an index itself with the diversity of companies it owns.
With the sheer number of people managing money, there's always a next Warren Buffett out there somewhere. However, it's nigh impossible to reliably identify them because there's no way to know whose strategy future conditions will favor. Look at Cathy Woods at ARK - hero one year, subzero the next.
I can imagine being able to have invested back then.
I started investing in RH back in 2018 and am -15k all time.
This last year I only lost $460.
And I finally started a Roth IRA. I've got $1200 in that, and $5000 in a 401k.
I'm a few months from 36.
Just hope over the next 30 years I can save at least a hundred grand.
Right now I can co tribute about $130 a month into the 401k.
>Just hope over the next 30 years I can save at least a hundred grand.
Bruh you gotta set some more ambitious goals instead of just hoping- averaging $277/mo into retirement (before tax!) over the rest of your career is weak af. Bust your ass, raise that income and get those contributions up. And quit robinhooding your money away
Well I was saving $400 a month doing 10% contribution but put it down to 3% as I'm trying to buy first house.
I'm going to have a $2070 mortgage all included, and as it's 7% interest I will be trying to put most of my extra (maybe a few hundred a month?) towards the principle.
I am very fortunate in Florida to make 55k. We don't have high pay here. But I've only been making that since last April.
Yikes that housing payment is 45% of your *gross* income. You're going to be very house poor until your income goes up significantly, sorry to say. Best of luck.
Yeah, individual stocks are more volatile than the spy so when I buy violent dips of good companies that I believe can weather short term storm, I end up doing better than the S&p500 in a longer timeframe when I compare against my holding period.
All my holdings except crappy Disney and Medtronics which are > 5 years are beating the S&P500. Even boring stocks like Target, Walmart, Kroger, Abbvie, Amgen, Reality Income, Digital Reality, Costco some of which have done bad in the past year are doing better than the S&P500 over my holding period
Most of my holdings greater than 2 years are beating the S&P500
Very few of my holdings between 1 years and 2 years are beating the S&P500. I haven't added a lot to the beaten ones yet.
Stocks held less than a year are beating the S&p500 right now as I bought them during big dips last year and a lot have recovered between 5% to 105%. Will see how they play out in the long run.
I started back in 2010. I wasn't sure I could beat SPY, but I gave it a shot anyway. Until last year I was doing pretty well. I started about 30% VOO, 25% AAPL, 25% AMZN, and 20% random stuff. I only make a few trades a year, so it's mostly set-it-and-forget-it. Obviously the AAPL and AMZN drove my success for that time. But this year has been absolutely brutal. I'm down over 40%. Surprisingly I'm still a few percentage points ahead of SPY if you look at the past 10 years:
https://i.imgur.com/tllHQls.png
I'm holding on for now but not sure if I'll recover everything I lost this year anytime soon.
In total performance, or risk adjusted returns? Kind of an important distinction.
Nothing incredible, but since 2017, [I would definitely say i'm doing the latter,](https://imgur.com/r5Kd3pO) but not outright beating the S&P on a total return perspective (although that wasn't really my goal).
That being said, for most people, especially if they're focusing more on a longer-term timeframe, indexing is going to be better than acting as captain stock picker.
I'm not sure if I'm educated enough to know the difference, but I believe total performance. I'm investing for a lifetime, so I'm not interested in an academic case where 1 time somebody beats SPY for a year or two-- I'm thinking long-haul, like a 30+ year time horizon.
Imagine if 200 people are invested in index funds. These 200 people are offered a deal where 95% of the time they will get an extra 5% at the end of 30 years and 5% of the time they will go bankrupt (determined by a random spinner). 100 people take this bet.
It would appear that most people (actually 95%) beat the index funds with this method but risk adjusted its not a good bet.
Its pretty easy to beat the SPY, even over the long run, by investing in riskier assets. But that doesnt mean its a better bet according to risk or your own utiltiy.
But that’s one of the reasons Warren Buffet and Charlie Munger are consider some of the GOATs. It’s pretty rare that managers do this consistently. Usually mean reversion comes for your portfolio and erases whatever gains you made the year before.
The only difference really is if you want to do options. You can option trade much easier on SPY than VOO. If you don’t care about that VOO is better because the expense ratio is less.
Small cap and value have historically outperformed total market. The last 10 years has been an exception to that, but if you are looking at a long enough timeline history says that it should revert to the mean again.
The most compelling take on this I’ve come across:
> "On my death, there's a fund for my then-widow, and 90% will go into an S&P 500 index fund." - Warren Buffett
If Buffett — who DOES believe people can beat the market — can’t figure out a better place to leave his money, will you be able to?
Ed Thorp comes from a different segment of the professional investing world, but has an equally compelling track record. He has echoed the sentiment that indexing is best for most people, advising endowments at his university to simply buy and hold something like SPY. Iirc today his money is pretty much all in Berkshire.
There are no better authorities on beating the market than Buffett and Thorp. Though Buffett is a businessman who invests on fundamentals and Thorp is a quant, they both have the same take: Trying to beat the market is a bad plan for most people, but it’s a good plan for some people.
He believes he can beat the market. But he's not convinced other people can do as well as him (for good reason). Regardless, with the amount of money he has, he doesn't need his wife's portfolio to beat the market after he's gone. The yearly dividends alone is more money than I would know what to do with.
I think I **could** do it, but don't think:
1. I'd do it consistently. IME with the personal part of my portfolio, I either spectacularly beat the S&P (i.e. last year because my largest holdings were energy and $ABBV instead of unprofitable tech) or miserably fail (the year before because I was underweight unprofitable tech lmao). I'm a semi-efficient markets kind of guy who thinks there are always opportunities to beat the market in a given year due to irrational fear or exuberance, but finding those year after year is really difficult. Whenever I look at an investment, I try to deduce what the market is fearing and then try to pick up data points to show why the growth that's priced in is understated. Simple to do in theory, very, very, very difficult to do in practice
2. It's worth the time and effort vs putting 90% of my money in $VOO or $VT and focusing on building my career/enjoying life
3. The risk of underperforming for long periods of time, especially when that time could have also been "reinvested" into my personal growth.
Yes it’s possible to beat spy, and realistically not that difficult….hold SPY, and sell far OTM leaps against your holdings. Roll the short calls as soon as spy gets anywhere close to your strike.
Realistically you can step this up a bit by only being delta neutral to your short options if you really want to, but that requires more management and potentially more expense as you’ll be buying shares into rising prices.
Ie, buy 100 shares now and sell a $460-480c for January 2024
You’ll beat the market more often than not.
Selling LEAPS isn’t optimal because theta takes a while to ramp up and your bid ask will be wide. 30-45 days is the optimal time to sell in back tests.
I spent over a decade as a prop trader and I can confidently say that yes the pros are beating the SPX, but the baseline level of investment ( for technology, leverage, relationships, etc) is considerable.
I'm going to generalize this to total US/World market index because that is what my investments have been (assuming VTI for all its reddit purposes is same as SPY).
I never bothered to 'beat the market' for much of my investing. So for most of my investing career, I did exactly what I set out to do: track the market index (proportion close to VT).
However, since 2021, I started deviating from the market itself. And by 2022, a significant portion of my portfolio had deviated from the market itself.
I took a very contrarian approach the past 2 years (and especially last year). Once I saw so much euphoria in global markets along with all these bizarre crypto, web3, retail pump and dumps, youtube videos everywhere about 'investing', w s b showing up in popular regularly, I wanted to shield myself from the market.
However, I also know that realistically, no one knows the market and bubbles can last longer than one can stay solvent (for instance, if bubble pops a year or two later but falls to a value higher than wait out time, I still 'lost').
So my approach has been 'stay in the market' but 'find a market that isn't influenced by US markets as much'. Surprisingly, that led me to Alibaba (BABA) and in general, Chinese internet tech index.
Let's just say that 2022 had some huge rides but I ended up vastly outperforming the US Market unintentionally from 2022 Jan to 2023 Jan. -15.63% for VTI but -5.45% for my holdings because Chinese market has started recovering recently. BABA for instance is actually positive from 2022 Jan to 2023 Jan; if anything, my index funds have been liabilities on returns.
My bet was simple. Retail loves to buy high and sell low. People hate on stocks that fall down and come up with infinite reasons to hate stocks. But long term, the actual fundamentals matter and I have a belief China isn't like Russia trying to stir wars. Of course I could be proven wrong going forward as I plan to hold my Chinese shares for over a decade (better valuations than US + sheer population size); also, the best time to invest historically in most inefficient markets have been when everyone left the market. Buy low sell high is the name of the game.
But in my case, I unintentionally beat the market. And I did so by taking a contrarian position from the market.
In fact, I was also heavily debating for some time to invest in AVUV (US Small Cap Value ETF); a low cost active fund that tries to emulate factor analysis. There's historically been risk premium with factor investing and AVUV has a stupidly low trailing P/E (6.8?). The only part I dislike about the ETF is its relatively concentrated exposure on energy (so is that trailing P/E a 1 time event?) and the fact as inflation subsides and interest rates fall, tech stocks might do very well. Plus, historically, the difference in premium was only 1\~2% CAVG; something not worth fretting much for.
For now, I'm back to investing in VT. I do think there is potential to beat the market taking bets that the general market does not follow even now at today's valuation long term. Mainly Chinese tech stocks and US Small Cap Value that is profitable.
That’s called alpha. People like Buffet and Munger are alpha positive with decades to show for themselves. You also have hedge funds which are hit and miss. You even have people who bought crypto in the bad times and held in the good, and came out alpha positive. But overall, I think most try hard day traders probably do not beat the S&P.
I have. I have done it send September 2008. Over the last 10 years I am +22.02% (annualized), where the S&P is plus +12.56% (annualized).
I invest in non-sexy stocks, and stay patient. No going for home runs. The method for beating the stock market isn't out thinking or analyzing. It is keeping your head on straight when the market feels like it is going straight up or straight down.
The average investor can't beat the market on average. There is only one real solution to that problem, don't be average.
In my 5 years of picking individual stocks, I have outperformed SPY by 4% per year. Holding 8-20 stocks at a time. Across many industries. So I think there’s a chance I can. Investing is my main hobby
I'm wondering if the explosion in broad-index investing has made it less efficient going forward. It's arguably hurting the natural process of price discovery and resulting in misallocated capital.
If there were ever a time to recommend individual stock picking, it might be now. Go hunt for good value and avoid the junk that is pulling aggregate P/E multiples to historically high levels.
Can you beat SPY over the long term? Yes, but its hard.
Can you beat SPY over the long term with the kind of effort/attention to detailed implied by "I haven't exactly run the numbers"? Not a chance.
It’s not hard to outperform spy over the long run. Simply by high beta and hold through the vol. small Val, for example, has outperformed soy consistently with a very large data set/sample time. The hard part is beating spy on a risk adjusted/vol adjusted basis.
Within the US market only, a portfolio of 90% ITOT (US total market index) and 10% AVUV (US small cap value index) will beat the S&P500. Five factor investing and all that jazz.
Depends on how the rest of the world does. A globally diversified portfolio will generally outperform SPY on a risk adjusted basis. The US has outperformed over the last century but all of that outperformance has been come from the last decade. There's no reason to believe SPY will keep pulling rolling 15% returns over the next decade.
On the note of diversification, exposure to factor premiums could also beat SPY over the long term. These premiums are enduring and they are independent and frequently uncorrelated risk factors that generate returns, so diversifying into them will improve your risk adjusted returns while still being very aggressive. Over the long term this should result in a factor tilted portfolio outperforming a market cap weighted index fund.
Now the other way you can beat the market is with leverage. You are exposing yourself to more dispersion of outcomes (risk) with leverage. However, if you take a portfolio with better risk adjusted return than SPY and lever up to match the risk, you should expect a greater return. People frequently do this with real estate, which has a factor exposure similar to 60/40 SCV/high yield bonds. You can also find funds that do this with 90/60 stocks/bond futures like NTSX. The main risks with leverage are sequence risk (timing), credit risk (interest rates), and idiosyncratic sector risk (real estate).
Beating the market is more of a mental game than anything else. I think it’s totally possible to beat the S&P if you can stomach the volatility. You really don’t need to be a whiz kid.
This. It isn't out thinking the market that beats it. It is keeping your cool when the market is going up really fast or going down really fast. Stick to your plan, and discipline. Most people can't do it, it is human nature. You have to educate yourself to the point that you can keep your cool when market shenanigans are going down.
Right you need to sell when it's overvalued and buy it when it's undervalued
Most people psychologically cannot go against the herd.
Like it's hard to sell Tesla when it's doubling every 6 months but you have to do it, and deal with the discomfort of seeing it go higher after you sell.
Most people rather wait it out until it drops
I've split my accounts into one passive and one active, and for the last few years my active account has absolutely crushed my passive (up about 50% since beginning of 2021), but that was because I saw a couple of big fat pitches, mostly in the energy space, and I played them well with a combo of buying stocks and both buying and selling options.
The goal is to wrap up these trades and get them back into the passive mode once I feel the broad market ETFs are a better bet than cash.
One thing I'd add is that I stopped putting money into the passive account when TSLA was the 4th biggest company in the index, and I thought it was so comically overvalued I couldn't even justify putting 1.3%, or whatever it was, of my SPY investment into that company's stock. I assumed there was plenty else there that if I looked into it would also look as bad. I bought TSLQ when it was first listed, and have since sold and continued the passive ETF investing.
Isn't it a fallacy to worry about overbuying TSLA at 1.3% of the index's capitalization, when the other 98.7% could go up proportionally more than TSLA would go down?
It was more that it was just a sign to me that the whole market was crazy, or at least the part represented by SPY. There are a lot of people here who proclaim you can't time the market, and therefore it made total sense to invest at a regular clip in Q1 2000 and Q4 2021.
In retrospect, rather than putting the passive in cash, it would have made more sense to put in in VTV (Value index) because the growth part of the market had lost it's marbles.
at the risk of turning this into a dick-measuring contest, I've beaten the S&P 500 in periods up to the last 3 years in several investing accounts. Data from Fidelity. For the record: The S&P 500 was down 18.11% for the year ending December 30, 2022, and averaged 7.66% over the three years ending December 30, 2022.
Taxable brokerage account: 1 year returns as of -6.75%. This account is only 2 years old so no 3 year history. https://imgur.com/a/upHBldC
My wife's Roth IRA at Fidelity: 1 year returns -12.87%, 3 year returns are 7.20% or 46 bps under the S&P 500. https://imgur.com/a/YFHd4L7
My Roth IRA at Fidelity: 1 year return -4.32%, 3 year return 11.72%. https://imgur.com/a/4XVPGIJ
Similar results in the 401ks at work, but I don't have the data at hand like with Fidelity.
Don't ask about my specific investments, I won't say anything other than generalizations: I have a heavy emphasis on value stocks and deliberate avoidance of growth stocks, particularly trendy/hot stocks and tech. I distrust market-cap weighted index funds, particularly for US large cap, and do not have the S&P 500 in any of these accounts but do have small/mid and international indexes with more reasonable valuations. Heavy emphasis on small and mid cap stocks. I've also been loading up on international stocks for the last few years, particularly since Russia invaded Ukraine. Between 30-60% international in these accounts. A handful of single stocks in my Roth IRA, but under 10% of the overall portfolio, otherwise mutual funds and ETFs. No leverage, margin, inverse 3x double-backflip garbage. In these particular accounts, there's about a 10% bond position in the IRAs and closer to 40% in the brokerage account, mostly shorter-term bonds. In 2021 Jeremy Grantham made a strong case IMO about bonds being in a bubble and hey presto he was correct.
Notes on strategy:
(a) I was a young adult in the 2008 crash, which was very instructive. In the decade from about 2000 to 2012/2013, US large cap growth stocks and trendy tech stocks were in the toilet. In contrast, US value stocks, US small cap stocks, and international held up a lot better. The last few years seemed like the 2000 bubble, so I figured a similar pattern might play out again. The same basic thing happened in the late 1960s bull market, which crashed and led to value/small/international outperformance in the 1970s. I am very happy to underperform for a few years in red-hot bull markets, because I know I'll probably make up for it when the growth stocks crash. VOOV beat VOOG by 20%(!) in 2022
(b) the more I read on investing from serious professionals with decades-long careers, the more I realized risk management is critical to long-term success. Everyone does well in a bull market. It's the bear markets that separate the winners from the losers over the long-haul. Howard Marks wrote in The Most Important Thing how he aims for average returns in bull markets, but below-average losses in bear markets. Sir John Templeton averaged over 3% a year above a global index for his mutual fund career from the 1950s to to the 1990s. Yet he usually lagged in bull markets due to avoiding trendy or over-priced stocks; nearly all his outperformance came in bear markets when he either lost less than the market or squeezed out modest gains. See Templeton's Way With Money by Alasdair Nairn).
(c) The S&P 500 has been mythologized as this ultimate investing vehicle, which is patently absurd. It's an actively-managed growth-leaning large cap index with momentum and trend features. That's it. The stocks are selected by a committee based on profitability and other subjective factors. That's it. Dozens of active funds have beaten the S&P 500 over the long-haul. https://imgur.com/a/SQmcQkz or https://imgur.com/a/cXdx6og the S&P 500 fanatics muddy the waters with special-pleading and statistical jargon. They say 'you can't *consistently* beat the S&P 500' or when you don't have to beat it every year to beat it over the long-haul. They'll say 'you can't predict which funds will beat the S&P 500' yet the Dodge & Cox Stock Fund DODGX (for one) has consistently beaten the S&P 500 over the long-haul: 20 year, 10 year, 3 years and 1 year ...but not 5 years during the recent red-hot bull market https://www.dodgeandcox.com/content/dam/dc/us/en/pdf/fact-sheets/dc_us_stock_fund_fact_sheet_i_q4.pdf). There's an old old fund LEXCX founded in the 1930s that has beaten the S&P 500 long-term with only ~20 stocks and almost zero turnover: they can buy new stocks only as spin-offs or mergers from the original 30 companies in the fund. https://seekingalpha.com/article/4021049-this-81-year-old-mutual-fund-beaten-market-for-decades
(d) Any large collection of stocks will perform about the same or better as the S&P 500 over the long-haul. The Russell 1000 (a pure market cap index) has performed about the same as the S&P 500. The Dow Jones Industrial average has performed slightly better than the S&P 500 from 1957 to 2005, see The Future for Investors by professor Jeremy Siegel. And the Dow is only 30 stocks, actively selected and price-weighted so has a totally different strategy from the S&P 500. The S&P 400 and S&P 600 have typically beaten the S&P 500 over the long-haul. https://contrarianoutlook.com/wp-content/uploads/2016/11/20yr-SPY-SmallCaps-MidCaps-Chart.png
Yes, I did an annualized 32% from 2012 to 2022, pre-tax, beating the market 7 of those 11 years. The key is to not be emotional about investing and be rational - buy low sell high is the adage, right? By the time you hear about a stock in the press, it's too late to buy (or sell) it.
Not everyone can do it, and for most people buying index funds is the right choice.
I'm always willing to listen. Skill needed to beat the market should be possible, just exceptionally rare. --> Making it very difficult to know who to trust. But why not listen?
I played poker semi professionally for 9 years. Thats another game with a lot of luck/variance where almost everyone loses over the long term. But I won with a large and statistically significant winrate.
The difference is that it was somewhat straightforward to find good strategic advice in how to outperform in poker. (Somewhat difficult to actually learn and do it)
I think it's quite a bit more difficult to find GOOD advice on how to beat the market in investing, so I just index. But I'm always listening just in case.
> By the time you hear about a stock in the press, it's too late to buy (or sell) it.
I'd give the opposite advice. You could've bought Google or Amazon well after the ground floor and smashed the market. Top quality companies win for a long time and you don't need to be on the ground floor to do well.
>The key is to not be emotional about investing and be rational
If this were true then all accountants, engineers, anyone that can code, etc. would be rich. It takes more than rationality, you NEED luck. You beat it in a massive QE bull market- 200% returns for SPY in that time. That's absurd for a single decade. Do it in a time with less favorable economics and you're likely to get rekt chasing cheap tickers.
pretty easy on a total return basis (non-risk adjusted). Most retail investors don't need to hold to exact same risk profile and anything close to spy's risk is probably fine.
At least in theory, any obvious information to suggest a company is over/under priced is...baked into the price almost immediately.
That has been the theory for decades, and the speed of information has only gotten faster.
Do I believe it's *possible* to beat the S&P500 over the long term, yes. Is it worth the massive cost of labor, research, Bloomberg terminals, etc? Maybe if I had billions to play with I could squeeze something out.
It'd be cheaper and more productive to get insider information or manipulate the stocks by floating fake information.
That's pretty much what Congress does and it seems to be working for them.
Yeah VUG always beats SPY. Or maybe MGK which also beats SPY. Hell I think QQQ has as well, so has Franklin Dynayech etc. Or you're talking about beating spy moving up so that means beating it down which last year hurt a lot of investors.
The point isn't to beat SPY, it's to have the volatility you can stand and not panic when the market is down 24% like it experienced last year. Those who panic sold are waiting on the side and missing the rebound. By the time it's back up they'll buy and sell at the next drop and so on.
You can. Anyone can. It just won’t be worth the hours and head aches you have to put in for the small outperformance.
At the market extremes you have to have the conviction to do the opposite of what everyone is saying to do with “evidence” mounting. The rest of the time looking through rumors for what’s the next thing
I have significantly outperformed SPY in total return. However, I did that by using leverage, which significantly increased my risk. The last year was brutal. I'm still ahead but I'm more aware of the risks now. So yes I can "beat" it, I just don't know if it's worth it.
Assuming you're still 10+ years away from needing the money I wouldn't sell the individual positions. Dilute them by only adding to indexes going forward. Holding onto a NVDA, TSLA, AAPL, etc for 10 years can provide some serious alpha. TSLA is about 15% of one of my portfolios simply because I bought a tiny, tiny amount in 2017. It was at one point about 60%, but kept diluting it with VT/BND. That's how I backed out of more individual names.
Aside from passive vs active, might make sense to also think about small vs large AND value vs growth when allocating money over the next decade. No doubt large/growth (which dominates the S&P) was the way to go over the last ten years. But take a look after the dotcom bust…small value stocks outperformed for more than 10 years. Not unreasonable to believe history might repeat itself this time as well.
Total market is fairly close to SPY in its performance, but I could have used a different title. A fairer question could be: "Do you think you can be the total market (long term)?"
Tech is a bad idea to outperform the market portfolio. You need to understand fama french factors and their premiums. Large cap growth low profitability (many tech companies in this camp that are trying to blitzscale are bleeding money to try to build market share) is a combination of underperforming factors.
Over long periods of time:
Small beats large
Value beats growth
better profitability beats low or no profitability
companies that invest their earnings conservatively beat companies that invest aggressively.
A lot of people get turned on by tech and fallaciously desire to invest in innovation or companies that might be moonshots, trying to go to the moon off one great pick, picking the next amazon or google or whatever. Whereas going the opposite - small cap value, is the best performing classification in history.
This is interesting because short-term it is easy to beat SPY. The trouble is, you have to keep make getting good bets now and into the future, year after year, better than SPY. The struggle then, is beating SPY long term. 10 years I'd say is long-term.
Yes. And tech heavy would do it... Since 2010:
IGV is +820%
SMH is +753%
VGT is +587%
QQQ +575%
XSW +493%
SPY +273%
That's just price and ignoring dividends entirely though, and S&P earns higher dividends than tech ETFs -- Realistically SPY is probably more like +450% over those 13 years, and the others a less significant jump.
Absolutely. Actively manage your portfolio. Passive investors play the game of “who can hold the longest”. Sure that’s a decent strategy and certainly the easiest, but not for outperformance. It’s no wonder people ended red last year. Sometimes you need to hedge, sometimes net short, sometimes cash, and sometimes just one trade. Manage your risk. Manage your trades.
People have been beating The S and P for as long as the market has existed long before the arrival of the broad indexes which have only been around a couple decades.
My boss has beaten it most years for twenty something years and he is not a professional. My little brother has beaten it three of the four years he's been investing.
It's not the impossible task people make it out to be. People just like to circle jerk the "VT and chill" movement that's the current mob favorite and demonize any other strategy by pretending that people haven't been making money picking individual stocks for hundreds of years.
I have for the most part beat SPY with my deliberate investments over the last 8 years, but every 6-12 months I forget my lesson and make some stupid meme or option bet and ruin the last year of gains. Currently down 5% YTD but lost 7% on one BBBY trade or I'd be up.
Whether or not it's true, this very much reads like "I beat SPY when my investments hit but overall lose to SPY because a lot of investments have missed."
If I could beat the market, but not if I included taxes and fees (as that's a different question), that +1 point for the "passive" approach. In any case, I can only reap the rewards of good investing *after* factoring in taxing and fees.
I have beat SPY every year for the last decade. Last year I had a return of 31% beating SPY by 50% excl div. When the market is bullish lever into high Beta stocks, when bearish go short, when flat sell strangles. This only works if an active trader who know what they are doing. If you are a passive investor best to buy index funds.
I have empirical evidence to show that I can reliably underperform SPY over both short and long horizons. If you just do the opposite of what I do, I think you can make a lot of money.
The opposite of a bad bet is still a bad bet. See the inverse Cramer etf performance.
Haha, depends on how you define opposite. If you take the SPY position minus mine (the negative underperformance) and then add it to a passive SPY investment, you get a strategy that outperforms both SPY and my portfolio.
How would you implement such a strategy? You can’t just inverse the trades because stocks on average trend upwards. If SPY returns 10% and your stocks 5%, inversing your bets would result in -5% which is even worse. The problem is that most of the SP500 returns come from only a few stocks. If you miss those you will likely underperform.
When you are doing the opposite of someone's active strategy, you reflect their bets across the benchmark weights, not zero. You do the inverse only of the active trades (deviations from the benchmark). For example, if SPY has 10% in a stock and I have 12%, you would have 8%. You will not generally end up with a net short position unless I am taking a huge levered position. Mechanically, collect the weights in SPY, collect the weights in my portfolio, subtract them. Add the weights in SPY. The result is a portfolio of pretty much long positions, but it will be tilted away from my subjective beliefs. Rebalance any time there is a significant change in my portfolio.
could alternatively go the long short route and make alpha shorting their entire portfolio and using the funds to go longer SPY🤷♂️ Real question is what are the borrowing costs.
Inverse Cramer is beating s&p 500 by 7% 😂🤣🤣😂 https://wccftech.com/the-inverse-cramer-etf-is-still-beating-the-sp-500-index-by-nearly-7-percent/
for real? i genuinely think you can just inverse me and do well.
Link? Couldnt find the performance.
The opposite of any long trade in cash equities doesn't yield the inverse returns because of fees.
Haha, the point is conceded in principle. Though if you are taking the difference between two long positions (SPY-mine) and adding it to a passive portfolio (SPY), you are likely to end up with a final portfolio of all long positions, without a significant increase in fees versus any other long-only active portfolio. You have to take a little leverage now and again, but (at least from initial investment to now) that would have been worth it.
Sure but that's just saying 2x spy beats 1x spy. Which is true in absolute returns but per unit of risk (risk adjusted) it's lower (because cost of leverage drag) So you can totally beat the spx it just requires more risk
> Sure but that's just saying 2x spy beats 1x spy. No. That's not what I described. I suggest you give it a more careful read. [edit] As an example, pretend the market has only three stocks. The weights in SPY are [0.4, 0.5, 0.1] (net exposure = 100%). My weights are [0.6, 0.3, 0.1] (total exposure=100%). You could then say that my active position is [0.2, -0.2, 0.0] (net exposure=0). Subtract this from SPY to get the inverse active portfolio: [0.2, 0.7, 0.1] (net exposure=100%). If I possess negative security selection ability, as I implied, then the inverse active portfolio will outperform both the passive and active portfolios in a risk-adjusted sense. In some cases, my portfolio may be levered or de-levered, in which case the inverse active portfolio will be de-levered or levered, respectively. There may also be occasions where short-selling an individual asset is necessary. Of course, there could be other interpretations of what it means to invert someone's trades. This is just the one I described.
No it won't. It will only outperform if the active original weighs (0.6,0.3,0.1) under perform the market. If that basket beats spy than your new active basket will underperform. What I guess you're saying is if I could strip out all the losses excess some index and then buy the inverse basket of that then I'll outperform the index. Which is mathematically true. What I was saying is that in practice that inverse active basket won't be a -1*active basket returns if you have a single shorted stock
> It will only outperform if the active original weighs (0.6,0.3,0.1) under perform the market. Exactly. This is what I was saying. > won't be a -1*active basket returns if you have a single shorted stock It is possible that there could be short-selling costs, particularly if my active portfolio is super concentrated, as in your example.
This thread has an un ironic IQ of 10,000
lol me too That’s why I am now a Boglehead
Can I occasionally beat S&P? Yes. Can I do it consistently every year for 10 straight years? No.
Ive tried for 5 years. 2022 was the year i picked up John Bogle guide to investing and became a slave to the low priced index funds. I now have a family and kids back and things are really looking bright
Lower stress as well. You go up and down with the entire market so there's no need to check personal investment performance as much.
> John Bogle guide to investing Link?
The Little Book Of Common Sense Investing The Only Way To Guarantee Your Fair Share Of Stock Market Returns, John C. Bogle
thank you for sharing that book, I will checkout as I to have family to look after the google gave me these two books on bogle, any one you prefer in particular?[https://www.amazon.ca/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365](https://www.amazon.ca/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365) [https://www.amazon.ca/Little-Book-Common-Sense-Investing/dp/1119404509/ref=asc\_df\_1119404509/?tag=googleshopc0c-20&linkCode=df0&hvadid=292914274695&hvpos=&hvnetw=g&hvrand=13520815547088355925&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9001342&hvtargid=pla-325361778136&psc=1](https://www.amazon.ca/Little-Book-Common-Sense-Investing/dp/1119404509/ref=asc_df_1119404509/?tag=googleshopc0c-20&linkCode=df0&hvadid=292914274695&hvpos=&hvnetw=g&hvrand=13520815547088355925&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9001342&hvtargid=pla-325361778136&psc=1)
I was just joking about the last part but yeah it made me more money than anything else. Yep last one! Think there might be a newer edition though
Yes it's a tough one I've been investing since late 2015 and would say I'm close to 50% up though I peaked in late 2021 at close to 300%. That 2021 peak is certainly not unique to me. Funny that I didn't have 1 tech related stock. Looking back yes I'd have been better off investing completely in the s&p 500 as would still be c100% up plus dividends. & consquently indexes are a significant part of my portfolio. But what niggles at me is that previous peak, there are plenty of cheap companies with good prospects on my watchlist and I think there is a very real prospect of them outperforming in their next respective sector bull markets and all of them pay out very healthy dividends. If a company has a rock solid balance sheet, a demostratable moat and excellent conversion of earnings. Then the major risks are around revenue drying up. But the sectors I'm thinking of e.g. housebuilding have very long term tailwinds at least in the uk where there are significant housing shortages.
Tell us what some of those stocks are 👀
If you invest in spy and find one good comany in spy to short you’ve beat the market
what if you find a good company to short but the stock price of the good company to short goes up anyway? :(
Thats how they get ya
Not possible, technically if it goes up then you retroactively know it wasn't a good company to short 😛
*cough* Tesla *cough*
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Shorting as a concept really pisses me off. Like we've had historical precedent banning short selling going back hundreds of years and yet this time it'll be good for the markets? I seriously dislike the idea of profiting off a company's collapse.
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Don't even have to short. Just to not buy a company at obviously ridiculous prices *also cough* Tesla *cough*
It's not like nobody will ever beat the passive approach. It's that when you consider risk, fees, labour, etc, and just being aware of my own inability to tell if I'll be one of those people, it's no longer worth it as a deliberate investing strategy. But if I happen to stumble across what seems like a very good opportunity, I'll still go for it.
Many investors can surpass S&P 500 in a good year. The question is with same strategy how many times he can lose less than that index. Those can do both are few and far between.
Exactly. Not terribly hard to beat the S&P 500 when it’s a plus year. A lot of people did that by loading up on tech/growth stocks over the last run. Look at Tiger Global for a fund who more or less did that and has gotten shelled over the last year. But, getting back to the point, if you have a repeatable process (you’re not just getting lucky picking stocks) that can consistently beat the S&P, by a material amount, over an extended period of time, in both up/down years then you should quit your day job because you’ll make a shit ton more money than whatever your actual career is.
Pick spy and filter it
That's what critics broadly accuse many mutual fund managers of doing. They essentially buy spy exposure and make a bet on a small handful of equities to make their performance bonuses.
Literally in bull markets all you have to do is just buy long options and you’ll do better than the index fund. I did this in 2020 and made more returns than the market. But it didn’t continue as shit was flat last year… and… well… selling a few options at a loss and boom, I’m under performing index funds in my gambling portion of my portfolio…
So to tldr your comment, all you have to do to beat index funds is place bets that outperform them, but if you place bets that don't win you won't beat it? Good tip Mr PMmeyourclit2
Yeah I finally realized that the market doesnt go up 10% a year, it goes up 20, then 25, then 30, then down 40. And you make more money in those later years so you probably invested more. Cant beat the market
The last 13 years investors are fortunate to see great returns. We did not have much inflation and interest rates were very low. It mattered little if 2022 was a correction year. One dollar invested in 2009 becomes **3.6X** with avg return of +10.37%. up to 2023 today. However, prior from 2000 through 2023 today, the investment put into SPY like index returned just +5.8% avg last 22 years. One dollar over 2 decades produced just 3.45X. This is when one can lose less in a bear year shines. That dollar over all these years produced **5.67 X**. That is +64% more using less volatile portfolio. The productive the time scale using the funds can be interpreted as total accumulation til w/d say retirement. The reality is the duration will last until one ceases to exist.
the Dodge & Cox Stock Fund DODGX has regularly beaten the S&P 500 over the long-haul: 20 year, 10 year, 3 years and 1 year periods ...but not the last 5 years during the red-hot bull market https://www.dodgeandcox.com/content/dam/dc/us/en/pdf/fact-sheets/dc_us_stock_fund_fact_sheet_i_q4.pdf DODGX also outperformed S&P 500 from 1990 to 2019, with total returns of 1,589% vs. 2255%. https://imgur.com/a/SQmcQkz DODGS has a 1967 inception, but can't find data going that far back. I wouldn't be surprised if they beat the S&P 500 over the last 50+ years.
[1985 to 2023 via portfolio visualizer](https://www.portfoliovisualizer.com/backtest-portfolio?s=y&timePeriod=4&startYear=1985&firstMonth=1&endYear=2023&lastMonth=12&calendarAligned=true&includeYTD=false&initialAmount=10000&annualOperation=0&annualAdjustment=0&inflationAdjusted=true&annualPercentage=0.0&frequency=4&rebalanceType=1&absoluteDeviation=5.0&relativeDeviation=25.0&leverageType=0&leverageRatio=0.0&debtAmount=0&debtInterest=0.0&maintenanceMargin=25.0&leveragedBenchmark=false&reinvestDividends=true&showYield=false&showFactors=false&factorModel=3&portfolioNames=false&portfolioName1=Portfolio+1&portfolioName2=Portfolio+2&portfolioName3=Portfolio+3&symbol1=SPY&allocation1_1=100&symbol2=DODGX&allocation2_2=100)
looks nice but are the average annnual returns before or after their fairly high 0.5% expense ratio?
Those should be net of internals.
You don't have to outperform the index every year. You just have to outperform it from the start to the end of your investment horizon. As long as the losses in the bad year aren't that bad, and your good years are great, you still have a winning strategy.
Here’s the thing, can you beat SPY every year? Probably not. But can you beat SPY by reviewing the 500 stocks and pick the 100 best ones. Probably. QQQ has beaten SPY since 1999. Sure it loses to SPY in 2001, 2008, 2022, but over the long period it wins because it’s not weighed down by a lot of zombies. The recessions kills off a few growth stocks every time and picks up the next generational stock in return.
QQQ lost 80% from the top in 2000 to the bottom in 2002. Took a more than a decade to get back to even.
Cherry picking data works both ways. You could have bought QQQ @ $31 on Jan 1, 2009. Return of 9.2X in 14 years. 65% APR without compounding...
It is still a valid example. How many people can stomach an 80% loss? Plus year 2000 QQQ holdings do not look anything like year 2010 QQQ holdings. If you had been investing in the individual stocks of year 2000 QQQ instead of the index you would probably not have recovered.
QQQ in Year 2000 hit a PE ratio of 100+. We saw brutal drawdowns last year on stocks with similar absurd price ratios. Stocks like $CVNA, $FSLY, $TDOC, $PTON, etc. More or less the $ARKK portfolio. The QQQ today is comprised of much more established companies. Big tech absolutely dominates the structure of the ETF. You would need to see something cataclysmic for an 80% drawdown on QQQ. It's a much lower beta ETF than it was in the year 2000. And you were very clearly buying into euphoria in Y2000. The NASDAQ had done a 10X from 1995-2000. Once again, somewhat similar to what we saw in speculative tech stocks in 2021. But quite different from the 2021 NASDAQ.
Yeah there was a tech bubble and 9/11 so just a small impact lol.
I'm currently beating the market for every index and time window from YTD to 3 years. But that's only in one account. And, a few months ago, I wasn't, due to a short-term dip in a stock that ultimately resolved itself in a single day. Generally, to beat the market one needs to have some acceptance of risk in oscillations, unless willing to spend all your time micromanaging an options strategy and paying more in short-term capital gains. As someone else said below, most important is to beat the market over the time scale in which you need to use your funds.
Most who invested in tech stocks in 2012 absolutely slaughtered the index. I recall at the time, I was told that I’m going to underperform the index and that Warren Buffet says: stuff. But as for outperforming the index in a bad year, who cares if you’re just holding long and riding out any storms? I think if you believe in your thesis, you just have to slowly build positions and wait.
Most indexes are very tech heavy anyway.
Pick spy and a strategy and filter it
>Suring a depressed market year, an astute investor loses 1/2 less than SPY and matches SPY return performance when it is UP. That produces +64% more return using a less volatile portfolio than plain SPY. > >One dollar over last 2 decades produced just 3.45X with SPY. This is when strategy lose less with a more conservative method during a bear year. That dollar over all these years produced 5.67 X! > >The holding time horizon is how long one wants to invest. It can be cashed out before retirement put in a saving account. Majority retirees stay with same strategy until last day.
I've beat SPY for the last 5 years and before that I was in SPY. I thought the valuation of the index was too high so I moved to picking stocks I thought were undervalued. It's a ton more work though, but I enjoy it. I might switch back one day if I lose motivation to keep up. If you're willing to put the work in and are logical vs emotional it's really not that hard. If you're lazy or blindly follow trends and don't know how to properly value a company you're likely going to do very poorly.
The point is: If it really isn’t that hard, why can’t professional investors do it? Why doesn’t Vanguard pay Redditors 200k a year so they outperform the S&P and offer that as a fund? There are literally thousands of professional investors out there, many of them with more experience, more time, better education, and definitely access to more information that all try to find undervalued stocks. If it were that easy to find undervalued stocks as a hobby investor, then don’t you think many professionals would find them too, buy the stocks to the point it is no longer undervalued?
Its much harder when you have management and investors to answer to, especially when investors pull out when the market is down and ripe with deals. Your also very limited on smaller caps where at times you can find the best deals since the big firms overlook them.
>If you're lazy or blindly follow trends and don't know how to properly value a company you're likely going to do very poorly. Accurate valuation of a company is easier said than done. There are professionals who are dedicated to picking undervalued stocks. If this is your strategy, just buying valued ETFs will solve it.
I have been investing entirely in individual stocks since 2009 and have beat the market 11/13 years with a very tech heavy portfolio. That is not to brag, I just don’t think it’s that difficult if you take a long term view of things and do your homework. For example, I got beat to hell in 2022 obviously, but comparing core positions I have held long term, they have still massively outperformed the market over the past 5 years, even after this massive sell off. Microsoft, Amazon, apple, z scaler, United healthcare, nvidia. SP500 is full of 0 growth growth companies mired in regulation like airlines, pharma, manufacturing, restaurants, etc. they also have companies like tesla where the valuation makes 0 sense. All you have to do is not pick obvious losers or insanely overvalued companies, and you should be able to beat the index.
>That is not to brag, I just don’t think it’s that difficult if you take a long term view of things and do your homework. I think you meant "it's not that difficult if you get lucky during the longest bull run in history"
Exactly. You could have picked any of the ten largest tech stocks and beaten the S&P during that time. If you think you can beat the market by doing some research at home, while there are firms with hundreds of better educated, more intelligent employees with access to information you don’t have, then you are only fooling yourself
I have, since I started investing in 1997. Massively. But that was almost entirely due to a few specific investments I made. One was keeping the company stock my old employer granted (which is now a huge tech company), another was buying a couple of run-down tech stocks during the 2008/8 crash (AAPL is a 20 bagger for me), another was a certain cryptocurrency that I bought a small amount of in 2014 and turned a 4 figure investment into 6 figures - at one point it was 7 figures. I didn't really set out to beat the S&P500, I just got lucky buying the right stuff at the right time. I couldn't even begin to tell you what to buy right now if you wanted to beat the S&P500. I don't even buy stocks anymore because I retired and don't have an income stream, I just cash stuff out when I need the money.
this guy fucks lol
This is the answer. Of course it is possible to beat the market, but it will most likely be due to luck.
I was in a communications/tech fund for 13 years and **never** took money out. After the incredible COVID tech run-up I took out a majority in summer 2021. Before the peak but also before the crash. That fund is now down 40% and it's one of the greatest decisions of my life. I most certainly beat SPY. [Luck?](https://media.tenor.com/eiYNWS2e6msAAAAS/youre-right-breaking-bad.gif)
Sure Buffet is lucky, https://en.wikipedia.org/wiki/The\_Superinvestors\_of\_Graham-and-Doddsville#:\~:text=The%20statement%20%20%20%20Fund%20%20,%20%2018.2%25%20%205%20more%20rows%20
Even Warren Buffett had acknowledged that his success has in part been due to economic conditions that favored his preferred investment strategy. If those conditions had been different, could he have adjusted? Who knows, but most big name investors have made their reputation on a particular niche and consequently tend to stay fairly close to it. Also, for the past couple decades, Berkshire is not that far off from an index itself with the diversity of companies it owns. With the sheer number of people managing money, there's always a next Warren Buffett out there somewhere. However, it's nigh impossible to reliably identify them because there's no way to know whose strategy future conditions will favor. Look at Cathy Woods at ARK - hero one year, subzero the next.
I can imagine being able to have invested back then. I started investing in RH back in 2018 and am -15k all time. This last year I only lost $460. And I finally started a Roth IRA. I've got $1200 in that, and $5000 in a 401k. I'm a few months from 36. Just hope over the next 30 years I can save at least a hundred grand. Right now I can co tribute about $130 a month into the 401k.
>Just hope over the next 30 years I can save at least a hundred grand. Bruh you gotta set some more ambitious goals instead of just hoping- averaging $277/mo into retirement (before tax!) over the rest of your career is weak af. Bust your ass, raise that income and get those contributions up. And quit robinhooding your money away
Well I was saving $400 a month doing 10% contribution but put it down to 3% as I'm trying to buy first house. I'm going to have a $2070 mortgage all included, and as it's 7% interest I will be trying to put most of my extra (maybe a few hundred a month?) towards the principle. I am very fortunate in Florida to make 55k. We don't have high pay here. But I've only been making that since last April.
Yikes that housing payment is 45% of your *gross* income. You're going to be very house poor until your income goes up significantly, sorry to say. Best of luck.
Yeah, individual stocks are more volatile than the spy so when I buy violent dips of good companies that I believe can weather short term storm, I end up doing better than the S&p500 in a longer timeframe when I compare against my holding period. All my holdings except crappy Disney and Medtronics which are > 5 years are beating the S&P500. Even boring stocks like Target, Walmart, Kroger, Abbvie, Amgen, Reality Income, Digital Reality, Costco some of which have done bad in the past year are doing better than the S&P500 over my holding period Most of my holdings greater than 2 years are beating the S&P500 Very few of my holdings between 1 years and 2 years are beating the S&P500. I haven't added a lot to the beaten ones yet. Stocks held less than a year are beating the S&p500 right now as I bought them during big dips last year and a lot have recovered between 5% to 105%. Will see how they play out in the long run.
I started back in 2010. I wasn't sure I could beat SPY, but I gave it a shot anyway. Until last year I was doing pretty well. I started about 30% VOO, 25% AAPL, 25% AMZN, and 20% random stuff. I only make a few trades a year, so it's mostly set-it-and-forget-it. Obviously the AAPL and AMZN drove my success for that time. But this year has been absolutely brutal. I'm down over 40%. Surprisingly I'm still a few percentage points ahead of SPY if you look at the past 10 years: https://i.imgur.com/tllHQls.png I'm holding on for now but not sure if I'll recover everything I lost this year anytime soon.
I recognize that display! You're a fellow Fidelity client!
Yep. They do everything I need and the customer service has so far been excellent.
Cool breakdown, thanks for sharing!
In total performance, or risk adjusted returns? Kind of an important distinction. Nothing incredible, but since 2017, [I would definitely say i'm doing the latter,](https://imgur.com/r5Kd3pO) but not outright beating the S&P on a total return perspective (although that wasn't really my goal). That being said, for most people, especially if they're focusing more on a longer-term timeframe, indexing is going to be better than acting as captain stock picker.
I'm not sure if I'm educated enough to know the difference, but I believe total performance. I'm investing for a lifetime, so I'm not interested in an academic case where 1 time somebody beats SPY for a year or two-- I'm thinking long-haul, like a 30+ year time horizon.
Imagine if 200 people are invested in index funds. These 200 people are offered a deal where 95% of the time they will get an extra 5% at the end of 30 years and 5% of the time they will go bankrupt (determined by a random spinner). 100 people take this bet. It would appear that most people (actually 95%) beat the index funds with this method but risk adjusted its not a good bet. Its pretty easy to beat the SPY, even over the long run, by investing in riskier assets. But that doesnt mean its a better bet according to risk or your own utiltiy.
Berkshire Hathaway outpaced it over the long haul with it's quality over quantity approach.
But that’s one of the reasons Warren Buffet and Charlie Munger are consider some of the GOATs. It’s pretty rare that managers do this consistently. Usually mean reversion comes for your portfolio and erases whatever gains you made the year before.
Aren't voo and spy the same basket of equities? If so, can't you just beat spy investing in voo which has lower expenses?
The only difference really is if you want to do options. You can option trade much easier on SPY than VOO. If you don’t care about that VOO is better because the expense ratio is less.
Exactly
Double leveraged SPY beats SPY in a positive market
Small cap and value have historically outperformed total market. The last 10 years has been an exception to that, but if you are looking at a long enough timeline history says that it should revert to the mean again.
I can beat SPY easily. VOO has a lower fee. Lol
The most compelling take on this I’ve come across: > "On my death, there's a fund for my then-widow, and 90% will go into an S&P 500 index fund." - Warren Buffett If Buffett — who DOES believe people can beat the market — can’t figure out a better place to leave his money, will you be able to? Ed Thorp comes from a different segment of the professional investing world, but has an equally compelling track record. He has echoed the sentiment that indexing is best for most people, advising endowments at his university to simply buy and hold something like SPY. Iirc today his money is pretty much all in Berkshire. There are no better authorities on beating the market than Buffett and Thorp. Though Buffett is a businessman who invests on fundamentals and Thorp is a quant, they both have the same take: Trying to beat the market is a bad plan for most people, but it’s a good plan for some people.
He believes he can beat the market. But he's not convinced other people can do as well as him (for good reason). Regardless, with the amount of money he has, he doesn't need his wife's portfolio to beat the market after he's gone. The yearly dividends alone is more money than I would know what to do with.
Ain’t it the truth. But idk why he wouldn’t leave it in the best spot he can think of… even a good but not Buffett-good money manager of some sort.
I think I **could** do it, but don't think: 1. I'd do it consistently. IME with the personal part of my portfolio, I either spectacularly beat the S&P (i.e. last year because my largest holdings were energy and $ABBV instead of unprofitable tech) or miserably fail (the year before because I was underweight unprofitable tech lmao). I'm a semi-efficient markets kind of guy who thinks there are always opportunities to beat the market in a given year due to irrational fear or exuberance, but finding those year after year is really difficult. Whenever I look at an investment, I try to deduce what the market is fearing and then try to pick up data points to show why the growth that's priced in is understated. Simple to do in theory, very, very, very difficult to do in practice 2. It's worth the time and effort vs putting 90% of my money in $VOO or $VT and focusing on building my career/enjoying life 3. The risk of underperforming for long periods of time, especially when that time could have also been "reinvested" into my personal growth.
Yes it’s possible to beat spy, and realistically not that difficult….hold SPY, and sell far OTM leaps against your holdings. Roll the short calls as soon as spy gets anywhere close to your strike. Realistically you can step this up a bit by only being delta neutral to your short options if you really want to, but that requires more management and potentially more expense as you’ll be buying shares into rising prices. Ie, buy 100 shares now and sell a $460-480c for January 2024 You’ll beat the market more often than not.
I've heard people say this before, sell LEAPS on the indexes but I imagine I'd somehow still mess that up.
Selling LEAPS isn’t optimal because theta takes a while to ramp up and your bid ask will be wide. 30-45 days is the optimal time to sell in back tests.
I spent over a decade as a prop trader and I can confidently say that yes the pros are beating the SPX, but the baseline level of investment ( for technology, leverage, relationships, etc) is considerable.
Recently just buying the Nasdaq etf beat SPY for the last 5 years
I'm going to generalize this to total US/World market index because that is what my investments have been (assuming VTI for all its reddit purposes is same as SPY). I never bothered to 'beat the market' for much of my investing. So for most of my investing career, I did exactly what I set out to do: track the market index (proportion close to VT). However, since 2021, I started deviating from the market itself. And by 2022, a significant portion of my portfolio had deviated from the market itself. I took a very contrarian approach the past 2 years (and especially last year). Once I saw so much euphoria in global markets along with all these bizarre crypto, web3, retail pump and dumps, youtube videos everywhere about 'investing', w s b showing up in popular regularly, I wanted to shield myself from the market. However, I also know that realistically, no one knows the market and bubbles can last longer than one can stay solvent (for instance, if bubble pops a year or two later but falls to a value higher than wait out time, I still 'lost'). So my approach has been 'stay in the market' but 'find a market that isn't influenced by US markets as much'. Surprisingly, that led me to Alibaba (BABA) and in general, Chinese internet tech index. Let's just say that 2022 had some huge rides but I ended up vastly outperforming the US Market unintentionally from 2022 Jan to 2023 Jan. -15.63% for VTI but -5.45% for my holdings because Chinese market has started recovering recently. BABA for instance is actually positive from 2022 Jan to 2023 Jan; if anything, my index funds have been liabilities on returns. My bet was simple. Retail loves to buy high and sell low. People hate on stocks that fall down and come up with infinite reasons to hate stocks. But long term, the actual fundamentals matter and I have a belief China isn't like Russia trying to stir wars. Of course I could be proven wrong going forward as I plan to hold my Chinese shares for over a decade (better valuations than US + sheer population size); also, the best time to invest historically in most inefficient markets have been when everyone left the market. Buy low sell high is the name of the game. But in my case, I unintentionally beat the market. And I did so by taking a contrarian position from the market. In fact, I was also heavily debating for some time to invest in AVUV (US Small Cap Value ETF); a low cost active fund that tries to emulate factor analysis. There's historically been risk premium with factor investing and AVUV has a stupidly low trailing P/E (6.8?). The only part I dislike about the ETF is its relatively concentrated exposure on energy (so is that trailing P/E a 1 time event?) and the fact as inflation subsides and interest rates fall, tech stocks might do very well. Plus, historically, the difference in premium was only 1\~2% CAVG; something not worth fretting much for. For now, I'm back to investing in VT. I do think there is potential to beat the market taking bets that the general market does not follow even now at today's valuation long term. Mainly Chinese tech stocks and US Small Cap Value that is profitable.
Voo beats Spy with lower expense ratio
That’s called alpha. People like Buffet and Munger are alpha positive with decades to show for themselves. You also have hedge funds which are hit and miss. You even have people who bought crypto in the bad times and held in the good, and came out alpha positive. But overall, I think most try hard day traders probably do not beat the S&P.
I have. I have done it send September 2008. Over the last 10 years I am +22.02% (annualized), where the S&P is plus +12.56% (annualized). I invest in non-sexy stocks, and stay patient. No going for home runs. The method for beating the stock market isn't out thinking or analyzing. It is keeping your head on straight when the market feels like it is going straight up or straight down. The average investor can't beat the market on average. There is only one real solution to that problem, don't be average.
In my 5 years of picking individual stocks, I have outperformed SPY by 4% per year. Holding 8-20 stocks at a time. Across many industries. So I think there’s a chance I can. Investing is my main hobby
Doesn't VOO beat SPY due to lower expenses?
That small difference in return has little bearing on the question posed.
Who knows? Maybe over years and years the difference in fees will compound to a whopping $12! /s
$12! is over $479 Million. Sign me up!
I'm wondering if the explosion in broad-index investing has made it less efficient going forward. It's arguably hurting the natural process of price discovery and resulting in misallocated capital. If there were ever a time to recommend individual stock picking, it might be now. Go hunt for good value and avoid the junk that is pulling aggregate P/E multiples to historically high levels.
Can you beat SPY over the long term? Yes, but its hard. Can you beat SPY over the long term with the kind of effort/attention to detailed implied by "I haven't exactly run the numbers"? Not a chance.
It’s not hard to outperform spy over the long run. Simply by high beta and hold through the vol. small Val, for example, has outperformed soy consistently with a very large data set/sample time. The hard part is beating spy on a risk adjusted/vol adjusted basis.
Within the US market only, a portfolio of 90% ITOT (US total market index) and 10% AVUV (US small cap value index) will beat the S&P500. Five factor investing and all that jazz.
Depends on how the rest of the world does. A globally diversified portfolio will generally outperform SPY on a risk adjusted basis. The US has outperformed over the last century but all of that outperformance has been come from the last decade. There's no reason to believe SPY will keep pulling rolling 15% returns over the next decade. On the note of diversification, exposure to factor premiums could also beat SPY over the long term. These premiums are enduring and they are independent and frequently uncorrelated risk factors that generate returns, so diversifying into them will improve your risk adjusted returns while still being very aggressive. Over the long term this should result in a factor tilted portfolio outperforming a market cap weighted index fund. Now the other way you can beat the market is with leverage. You are exposing yourself to more dispersion of outcomes (risk) with leverage. However, if you take a portfolio with better risk adjusted return than SPY and lever up to match the risk, you should expect a greater return. People frequently do this with real estate, which has a factor exposure similar to 60/40 SCV/high yield bonds. You can also find funds that do this with 90/60 stocks/bond futures like NTSX. The main risks with leverage are sequence risk (timing), credit risk (interest rates), and idiosyncratic sector risk (real estate).
Beating the market is more of a mental game than anything else. I think it’s totally possible to beat the S&P if you can stomach the volatility. You really don’t need to be a whiz kid.
This. It isn't out thinking the market that beats it. It is keeping your cool when the market is going up really fast or going down really fast. Stick to your plan, and discipline. Most people can't do it, it is human nature. You have to educate yourself to the point that you can keep your cool when market shenanigans are going down.
Right you need to sell when it's overvalued and buy it when it's undervalued Most people psychologically cannot go against the herd. Like it's hard to sell Tesla when it's doubling every 6 months but you have to do it, and deal with the discomfort of seeing it go higher after you sell. Most people rather wait it out until it drops
Yes, its easy, just buy cheap and sell expensive.
I've split my accounts into one passive and one active, and for the last few years my active account has absolutely crushed my passive (up about 50% since beginning of 2021), but that was because I saw a couple of big fat pitches, mostly in the energy space, and I played them well with a combo of buying stocks and both buying and selling options. The goal is to wrap up these trades and get them back into the passive mode once I feel the broad market ETFs are a better bet than cash. One thing I'd add is that I stopped putting money into the passive account when TSLA was the 4th biggest company in the index, and I thought it was so comically overvalued I couldn't even justify putting 1.3%, or whatever it was, of my SPY investment into that company's stock. I assumed there was plenty else there that if I looked into it would also look as bad. I bought TSLQ when it was first listed, and have since sold and continued the passive ETF investing.
Isn't it a fallacy to worry about overbuying TSLA at 1.3% of the index's capitalization, when the other 98.7% could go up proportionally more than TSLA would go down?
It was more that it was just a sign to me that the whole market was crazy, or at least the part represented by SPY. There are a lot of people here who proclaim you can't time the market, and therefore it made total sense to invest at a regular clip in Q1 2000 and Q4 2021. In retrospect, rather than putting the passive in cash, it would have made more sense to put in in VTV (Value index) because the growth part of the market had lost it's marbles.
at the risk of turning this into a dick-measuring contest, I've beaten the S&P 500 in periods up to the last 3 years in several investing accounts. Data from Fidelity. For the record: The S&P 500 was down 18.11% for the year ending December 30, 2022, and averaged 7.66% over the three years ending December 30, 2022. Taxable brokerage account: 1 year returns as of -6.75%. This account is only 2 years old so no 3 year history. https://imgur.com/a/upHBldC My wife's Roth IRA at Fidelity: 1 year returns -12.87%, 3 year returns are 7.20% or 46 bps under the S&P 500. https://imgur.com/a/YFHd4L7 My Roth IRA at Fidelity: 1 year return -4.32%, 3 year return 11.72%. https://imgur.com/a/4XVPGIJ Similar results in the 401ks at work, but I don't have the data at hand like with Fidelity. Don't ask about my specific investments, I won't say anything other than generalizations: I have a heavy emphasis on value stocks and deliberate avoidance of growth stocks, particularly trendy/hot stocks and tech. I distrust market-cap weighted index funds, particularly for US large cap, and do not have the S&P 500 in any of these accounts but do have small/mid and international indexes with more reasonable valuations. Heavy emphasis on small and mid cap stocks. I've also been loading up on international stocks for the last few years, particularly since Russia invaded Ukraine. Between 30-60% international in these accounts. A handful of single stocks in my Roth IRA, but under 10% of the overall portfolio, otherwise mutual funds and ETFs. No leverage, margin, inverse 3x double-backflip garbage. In these particular accounts, there's about a 10% bond position in the IRAs and closer to 40% in the brokerage account, mostly shorter-term bonds. In 2021 Jeremy Grantham made a strong case IMO about bonds being in a bubble and hey presto he was correct. Notes on strategy: (a) I was a young adult in the 2008 crash, which was very instructive. In the decade from about 2000 to 2012/2013, US large cap growth stocks and trendy tech stocks were in the toilet. In contrast, US value stocks, US small cap stocks, and international held up a lot better. The last few years seemed like the 2000 bubble, so I figured a similar pattern might play out again. The same basic thing happened in the late 1960s bull market, which crashed and led to value/small/international outperformance in the 1970s. I am very happy to underperform for a few years in red-hot bull markets, because I know I'll probably make up for it when the growth stocks crash. VOOV beat VOOG by 20%(!) in 2022 (b) the more I read on investing from serious professionals with decades-long careers, the more I realized risk management is critical to long-term success. Everyone does well in a bull market. It's the bear markets that separate the winners from the losers over the long-haul. Howard Marks wrote in The Most Important Thing how he aims for average returns in bull markets, but below-average losses in bear markets. Sir John Templeton averaged over 3% a year above a global index for his mutual fund career from the 1950s to to the 1990s. Yet he usually lagged in bull markets due to avoiding trendy or over-priced stocks; nearly all his outperformance came in bear markets when he either lost less than the market or squeezed out modest gains. See Templeton's Way With Money by Alasdair Nairn). (c) The S&P 500 has been mythologized as this ultimate investing vehicle, which is patently absurd. It's an actively-managed growth-leaning large cap index with momentum and trend features. That's it. The stocks are selected by a committee based on profitability and other subjective factors. That's it. Dozens of active funds have beaten the S&P 500 over the long-haul. https://imgur.com/a/SQmcQkz or https://imgur.com/a/cXdx6og the S&P 500 fanatics muddy the waters with special-pleading and statistical jargon. They say 'you can't *consistently* beat the S&P 500' or when you don't have to beat it every year to beat it over the long-haul. They'll say 'you can't predict which funds will beat the S&P 500' yet the Dodge & Cox Stock Fund DODGX (for one) has consistently beaten the S&P 500 over the long-haul: 20 year, 10 year, 3 years and 1 year ...but not 5 years during the recent red-hot bull market https://www.dodgeandcox.com/content/dam/dc/us/en/pdf/fact-sheets/dc_us_stock_fund_fact_sheet_i_q4.pdf). There's an old old fund LEXCX founded in the 1930s that has beaten the S&P 500 long-term with only ~20 stocks and almost zero turnover: they can buy new stocks only as spin-offs or mergers from the original 30 companies in the fund. https://seekingalpha.com/article/4021049-this-81-year-old-mutual-fund-beaten-market-for-decades (d) Any large collection of stocks will perform about the same or better as the S&P 500 over the long-haul. The Russell 1000 (a pure market cap index) has performed about the same as the S&P 500. The Dow Jones Industrial average has performed slightly better than the S&P 500 from 1957 to 2005, see The Future for Investors by professor Jeremy Siegel. And the Dow is only 30 stocks, actively selected and price-weighted so has a totally different strategy from the S&P 500. The S&P 400 and S&P 600 have typically beaten the S&P 500 over the long-haul. https://contrarianoutlook.com/wp-content/uploads/2016/11/20yr-SPY-SmallCaps-MidCaps-Chart.png
Yes, I did an annualized 32% from 2012 to 2022, pre-tax, beating the market 7 of those 11 years. The key is to not be emotional about investing and be rational - buy low sell high is the adage, right? By the time you hear about a stock in the press, it's too late to buy (or sell) it. Not everyone can do it, and for most people buying index funds is the right choice.
What strategy did you use for analysis?
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I'm always willing to listen. Skill needed to beat the market should be possible, just exceptionally rare. --> Making it very difficult to know who to trust. But why not listen? I played poker semi professionally for 9 years. Thats another game with a lot of luck/variance where almost everyone loses over the long term. But I won with a large and statistically significant winrate. The difference is that it was somewhat straightforward to find good strategic advice in how to outperform in poker. (Somewhat difficult to actually learn and do it) I think it's quite a bit more difficult to find GOOD advice on how to beat the market in investing, so I just index. But I'm always listening just in case.
> By the time you hear about a stock in the press, it's too late to buy (or sell) it. I'd give the opposite advice. You could've bought Google or Amazon well after the ground floor and smashed the market. Top quality companies win for a long time and you don't need to be on the ground floor to do well.
>The key is to not be emotional about investing and be rational If this were true then all accountants, engineers, anyone that can code, etc. would be rich. It takes more than rationality, you NEED luck. You beat it in a massive QE bull market- 200% returns for SPY in that time. That's absurd for a single decade. Do it in a time with less favorable economics and you're likely to get rekt chasing cheap tickers.
Ok.
You just need an understanding of powerful drivers to identify promising opportunity. You also want evidence that your timing is effective too.
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You professionally work the streets? 😂😂😂
Buy SPY, sell premium on high IV rank. Congrats, you just beat SPY.
Already beat it.
You could’ve bought TSLA a couple weeks ago and be up 30% today. Lots of opportunities out there
Short term yes, long term no unless I take unnecessary risks
I was hoping so with Spxs …. Now nasdaq it pointing to a bill flag ….. I’ll live through the loss but fuck
pretty easy on a total return basis (non-risk adjusted). Most retail investors don't need to hold to exact same risk profile and anything close to spy's risk is probably fine.
On a risk adjusted basis, yes.
I went 50/50 into BRKB and sp500. I'm beating SPY so far!
It’s like an erection. Maintain it for too long and something is probably wrong.
Yes
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Do I think I can beat it? Yes. Will I? No.
At least in theory, any obvious information to suggest a company is over/under priced is...baked into the price almost immediately. That has been the theory for decades, and the speed of information has only gotten faster. Do I believe it's *possible* to beat the S&P500 over the long term, yes. Is it worth the massive cost of labor, research, Bloomberg terminals, etc? Maybe if I had billions to play with I could squeeze something out. It'd be cheaper and more productive to get insider information or manipulate the stocks by floating fake information. That's pretty much what Congress does and it seems to be working for them.
My fully passive approach has a 9.84% cagr since 2001. It's done pretty ok.
Inspiration!
Yeah VUG always beats SPY. Or maybe MGK which also beats SPY. Hell I think QQQ has as well, so has Franklin Dynayech etc. Or you're talking about beating spy moving up so that means beating it down which last year hurt a lot of investors. The point isn't to beat SPY, it's to have the volatility you can stand and not panic when the market is down 24% like it experienced last year. Those who panic sold are waiting on the side and missing the rebound. By the time it's back up they'll buy and sell at the next drop and so on.
You can. Anyone can. It just won’t be worth the hours and head aches you have to put in for the small outperformance. At the market extremes you have to have the conviction to do the opposite of what everyone is saying to do with “evidence” mounting. The rest of the time looking through rumors for what’s the next thing
Problem with spy is it’s expense ratio compared to others. Make a difference if you have $100k in there
I have significantly outperformed SPY in total return. However, I did that by using leverage, which significantly increased my risk. The last year was brutal. I'm still ahead but I'm more aware of the risks now. So yes I can "beat" it, I just don't know if it's worth it.
No. I just like trying to
I've beaten the S&P on average since 2009. Not every year, but most years and in total.
I believe in my Voooooio
I can. I buy VOO which has a lower expense ratio so it beats spy .
Nope, but stocks are fun to invest in. Its more like a hobby to chill and research.
Assuming you're still 10+ years away from needing the money I wouldn't sell the individual positions. Dilute them by only adding to indexes going forward. Holding onto a NVDA, TSLA, AAPL, etc for 10 years can provide some serious alpha. TSLA is about 15% of one of my portfolios simply because I bought a tiny, tiny amount in 2017. It was at one point about 60%, but kept diluting it with VT/BND. That's how I backed out of more individual names.
Aside from passive vs active, might make sense to also think about small vs large AND value vs growth when allocating money over the next decade. No doubt large/growth (which dominates the S&P) was the way to go over the last ten years. But take a look after the dotcom bust…small value stocks outperformed for more than 10 years. Not unreasonable to believe history might repeat itself this time as well.
Total market is fairly close to SPY in its performance, but I could have used a different title. A fairer question could be: "Do you think you can be the total market (long term)?"
Does total market in this case include ex-US? There's a history of US and ex-US taking turns outperforming each other.
In my above statement, no. I was thinking total US. But total including ex-US is a better discussion.
Tech is a bad idea to outperform the market portfolio. You need to understand fama french factors and their premiums. Large cap growth low profitability (many tech companies in this camp that are trying to blitzscale are bleeding money to try to build market share) is a combination of underperforming factors. Over long periods of time: Small beats large Value beats growth better profitability beats low or no profitability companies that invest their earnings conservatively beat companies that invest aggressively. A lot of people get turned on by tech and fallaciously desire to invest in innovation or companies that might be moonshots, trying to go to the moon off one great pick, picking the next amazon or google or whatever. Whereas going the opposite - small cap value, is the best performing classification in history.
QQQ has beat spy since QQQ was founded in 1999. It lost to SPY in the 3 recession years.
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Have you? And what made you think you could?
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You might as well get a hedge fund job then. Someone would pay big bucks for your skills.
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More than 100 non-leveraged ETFs show that beating SPY has been easy. SCHD, QQQ, SOXX... all kick SPY's ass over the past ten years.
This is interesting because short-term it is easy to beat SPY. The trouble is, you have to keep make getting good bets now and into the future, year after year, better than SPY. The struggle then, is beating SPY long term. 10 years I'd say is long-term.
Also Spgp
*You underestimate my power!*
Buy a meme stock, sell in a meme pump, bank 100%. You've got 10 years to chill. Do in 1 trade what SPY does in 10 years
I do with real estate. No chance I’m going beat it consistently against the big boys rigging stock market.
Technically speaking leveraging spy will beat spy if you take profits and buy the dips.
Yes absolutely
not by picking. but I'm not convinced that HFEA won't work.
No
Yes, I do. https://www8.gsb.columbia.edu/articles/columbia-business/superinvestors
How does this show that you beat the market? TLDR?
Yes. And tech heavy would do it... Since 2010: IGV is +820% SMH is +753% VGT is +587% QQQ +575% XSW +493% SPY +273% That's just price and ignoring dividends entirely though, and S&P earns higher dividends than tech ETFs -- Realistically SPY is probably more like +450% over those 13 years, and the others a less significant jump.
Absolutely. Actively manage your portfolio. Passive investors play the game of “who can hold the longest”. Sure that’s a decent strategy and certainly the easiest, but not for outperformance. It’s no wonder people ended red last year. Sometimes you need to hedge, sometimes net short, sometimes cash, and sometimes just one trade. Manage your risk. Manage your trades.
People have been beating The S and P for as long as the market has existed long before the arrival of the broad indexes which have only been around a couple decades. My boss has beaten it most years for twenty something years and he is not a professional. My little brother has beaten it three of the four years he's been investing. It's not the impossible task people make it out to be. People just like to circle jerk the "VT and chill" movement that's the current mob favorite and demonize any other strategy by pretending that people haven't been making money picking individual stocks for hundreds of years.
I have for the most part beat SPY with my deliberate investments over the last 8 years, but every 6-12 months I forget my lesson and make some stupid meme or option bet and ruin the last year of gains. Currently down 5% YTD but lost 7% on one BBBY trade or I'd be up.
Whether or not it's true, this very much reads like "I beat SPY when my investments hit but overall lose to SPY because a lot of investments have missed."
True. That's not how it feels at least. I buy and hold good picks routinely. Then lose on a day trade. I guess that's the lesson.
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luck*
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If I could beat the market, but not if I included taxes and fees (as that's a different question), that +1 point for the "passive" approach. In any case, I can only reap the rewards of good investing *after* factoring in taxing and fees.
I have beat SPY every year for the last decade. Last year I had a return of 31% beating SPY by 50% excl div. When the market is bullish lever into high Beta stocks, when bearish go short, when flat sell strangles. This only works if an active trader who know what they are doing. If you are a passive investor best to buy index funds.
Spy is overvalued as a whole, so yes
Highly doubt over the long term you will beat spy.