The Laziest Way to Beat the S&P 500 (SPY ETF) 😴

00:00 - Most can’t beat S&P 500
00:43 - S&P 500 (SPY or VOO) vs. Total Stock Market Index (VTI)
01:01 - Comparing Portfolios
02:26 - Style Differences
04:10 - How does this translate to risk?
05:49 - Performance Comparison: VTI vs. SPY
06:52 - What if we go back to 1970s?
07:33 - Bottom Line
09:09 - Thanks supporters!

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This is entertainment only, not investment advice. All opinions expressed are my own. Any stocks or ETFs mentioned may be owned or taken a position within the next 48 hours. Neither the information nor any opinion expressed it so be construed as a solicitation to buy or sell a security of personalized investment, tax, or legal advice. This is prepared for informational purposes only. It does not address specific investment objectives, or the financial situation and the particular needs of any person who may receive this report. The information herein was obtained from various sources. Dividend Growth Machine LLC does not guarantee the accuracy or completeness of the information provided by third parties. The information in this report is given as of the date indicated and is believed to be reliable. Dividend Growth Machine LLC assumes no obligation to update this information or to advise on further developments relating to it.

[dennisr]

HI NATHAN,
Hope your Family had a Great Christmas. A few years back a bought a book by Sam Stovall named The Seven Rules of Wall Street. One of the Rules is called the Free Lunch. Purchase the Technology and Staples Sectors at the beginning of each year and at the end of the year rebalance. It does not beat the S&P 500 every year but it keeps close and long term (5-10 years) it beats the S&P 500. When Covid Came and seeing the impacts and logistics in Staples I swapped Staples with Healthcare. Backtesting with Tech and Healthcare using Sam's process of just simply rebalancing once a year it beats the SPY by nearly 4% annually after 10. You probably do this with a equal weighted stock portfolio of the holdings of the top 10 or 15 companies of each sector? Have you also checked the Barbell approach of Value-Growth? It might be a interesting video? Maybe with stocks of both or ETFs? Thanks for the Fantastic articles and video you do. Great Job. Let's all have a Fantastic 23.

[jecny]

If you go back as far as you can, that would be 1926. An academic research paper tracked and compared the returns of all publicly traded stocks in the NYSE (TSM) to the S&P index which was founded in 1926, originally as the S&P 90 until it became the 500 in 1957. From 1926-2019 the TSM and S&P had a correlation of 0.98%. For reference purposes, 1 is considered an exact match. That means that there was a statistical difference of 0.02% over the 93 year range of the study. For the record, it was the S&P that edged the TSM. Of course, you will get different results depending on the time frame of your back testing. As you noted, the TSM edged out the SP&P over the period 2001-2021. But it was the S&P that edged the TSM from 2011-2021. In short, unless you can find a significant difference in fees and expenses, or tax efficiency, I see no difference between the two that would cause me to strongly favor one over the other. The slight differences in returns over various periods can be attributed to the vagaries of economic conditions and major events that are typically unpredictable.

[NotThatKraken]

I’d be curious about OEF (S&P 100) vs. SPY (S&P 500). SPY is obviously more diverse, but OEF has had somewhat higher returns and lower volatility in its lifetime. Is that just an effect of the short time period to compare them, or do larger companies actually do better over long periods too.

[NathanWinklepleckCFA]

Which would you prefer? S&P 500 or total stock market index? Let me know in the comments below! Thanks again for all of your support and MERRY CHRISTMAS! 🎄

[ceciliaruns]

Great comparison! I have VOO in my 401k (institutional shares) and VTI, SCHD in my Roth.

[evanspiteri]

VTI in Roth and SCHD with a handful of top quality individual companies in my taxable and let them do their thing! Happy Holidays to you and your family Nathan.

[augustinelark]

So is it better to buy options on stocks or etf's?

[DungNguyen-vneu]

What do you tink about OMFL I am thinking about purchasing some...

[awalton]

A similar video comparing VTI to VT would be great.

[mr.financial]

Thanks for that Nathan. The performance difference is so small because of the weighting of the funds. The top 60 in VTI make up about 45% of the fund and are the exact same as VOO with the top 60 making up slightly more. If you are a believer in the small cap space, VTI gives very little exposure and really makes next to no difference. Because the top 10 are so heavily weighted, a big move by AAPL would impact either ETF much more than all the bottom 100 stocks in VTI ever could in a given year. That's my thought on this topic

[Camsmith_]

Thoughts on other vanguard related funds such as VOOG/VOOV in relation to the two mentioned here? Obviously less diversified but I wonder your thoughts about these funds on a long term basis!

[calebmacdonald]

If large cap and total market have the same performance over 30+ years, but large cap has slightly great volatility on global downturns, wouldn’t that present an opportunity to dollar cost averaging lifetime investors who would get bigger discounts on large cap during those times?

[walnutinvesting]

Thanks for the video. Have you ever made a video on REITs?

[Sylvan_dB]

First you need to define the term - long term (10years plus), short term (less than 1 year) - and if you intend to beat on upside, downside, or both. Long-term average the research I've read indicates you buy 100% VOO or SPY, and another 30% to 50% in bonds. Yes, leverage. With the long-term uptrend, you'll lose some additional on the downside, but make it up on the upside. Or if you want to avoid leverage, you could just try large-cap value - historically has outperformed over most periods on average, and on downside, but lags on the upside. Or if you believe the Fama and French factors, just do small cap value. (I don't believe that one.)

[glendavis]

So how did you get the results back to 1973 through Portfolio Visualizer?
The my experience has been running several years with VTI in the past and it did comparatively well. What I’d like to see is VTI in two renditions, one market cap weighted the other equal weighted. I’m not a fan of market cap as it overweights too many of the first 15 holdings. I’d suggest two tier for SPY. I presently have 6 accounts and one is stocks only but to compare I invested the same amount of money in SPY as each stock to track the results. This is the first time I’ve done a account in stocks. Answer to your question: Generally in the extreme down market that we now have (2022) I’d be incline to run with VTI over SPY!

[joecarlasare]

Nathan - any thoughts on a international momentum ETF such as IMTM vs MTUM given the extreme exposure to U.S. equities ?

[vyrwu]

VTI or MSCI World for one-ETF portfolio?

[michaelswami]

I recommended to my daughter a four fund portfolio, VOO, VO, VB, and VXUS, in equal percentages. VTI is too heavily weighted in large caps and has no foreign stocks.

[jonathankrimer]

Question: Why not an etf "swap" that reinvests the drip of the dividend for you so you can avoid dividend income.

[sunlite]

VTI dropped 45 points in the trailing year and pays 1, 52%. Sorry don't have 2 lifetimes to wait...if it ever comes back! CG's and dividends mean nothing if one sells at the lows. Now what was that about market timing. That is reality.