Why Is It So Hard To Beat The S&P 500?

You've probably heard that most investors and professional fund managers alike cannot beat the S&P 500 in the long run. This is true, but did you ever wonder why its so hard to beat the S&P? When we look back at historical returns all of the paths that would have outperformed the S&P look obvious. The problem is that everything looks clear in hindsight, but when you're acting in the present things tend to get a bit more complicated. Today I want to share with you one of the factors that makes it very difficult to beat the S&P in the long run. I hope you enjoy!

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Disclaimer: This video is intended for entertainment purposes only and should not be taken as investment advice.

[MrMinnesotaMac]

LEARN FROM ME! I played by the rules of the game for 30 years. I had Financial Advisors telling me diversification was the way to go. For 30 years I watched as my funds barely grew more than I contributed to them. Then Covid hit. I watched video after video until I saw one that showed me the true cost of using a FA. Most FA's charge a 1% fee and then invest you in funds that also charge a 1% fee. When you consider that 93% of Fund Managers don't beat the S&P 500, no wonder the majority of us never get out of the middle class. Unless the FA is beating the S&P 500 by 2 points, you're losing ground. And, let's face it, they're not. I promptly fired my FA and put everything into a S&P Index Fund. I'm on the road to recovery. The takeaway, question everything and don't be afraid to do it yourself.

[szvrmbu]

I've been mostly S and P for about 25 years (once the index fund got into our retirement plan). Best thing I ever did. Slow and steady wins the race. And more importantly, you may be able to eek out a little excess return over the S and P (1 of 2 percent), but WOW you can loose spectacularly. Set it and forget it. You are using the collective wisdom of the market to pick the winners and the best part is, you don't have to know a thing. The process allocates stocks by market cap and that is the collective knowledge of the market you are using.

[mr.dividend.investor]

I love picking stocks, but I know that investing in the S&P 500 is the better way to go. Thanks for the video. Aloha 🤙

[dimitristripakis]

The thing is that SP500 is the 500 "best" companies. If a company is not doing very well, it will be removed and another (possibly rising) will take its place. I do not believe that the average investor can follow up himself with this "ordering of companies".

[smeshnoymatvey]

You can beat SP index if you take higher risk with small caps. But that's not fair.

[sbfredster]

I agree fully that the S&P 500 is tough to beat for various reasons including skewness, investor behavior, stock selection and the turnover in the index (always adding stocks that successfully graduate to the large cap arena, and booting the stocks of companies that are shrinking in size). Your analysis of skew left me confused... can you clarify? Your histogram of returns of INDIVIDUAL stocks over the 20 year period shows the skew in the individual stock returns in the index and the difficulty of picking the "above average" performers. The average and median here (on your chart) is the average return of the 1012 stocks analyzed (I assume) in the 20 year period not the cumulative return of the S&P 500 index for the period (where each stock is weighted by its capitalization (size) and the index is therefore "driven" by the largest companies). The 20 year return for the S&P 500 INDEX for this period is in the zone of the 239% but the index return is neither an average or median return but rather the compound annual return for the index (of 500 stocks) for the 20 years. So I get why you say it's hard to pick the winners in the 1012 stocks analyzed (1:4 chance, 26% in the sample) but picking winners in the top 26% of the sample doesn't mean you beat the S&P 500 capitalization weighted index over the period... just that you beat the average stock. Seems like you're mixing S&P index performance with the distribution of individual stocks in the index. Am I missing something? Thanks for the analysis

[logarithm]

What about long term? What if America loses the world economical leadership, would that affect the index returns long term?

[Judah_Mafia_]

It’s possible to beat it. Because I have until it dipped but I will beat it again

[hvince]

Once you started talking about "skewnew", I switched off. It's so boring!
And OMG, I'm so fed up with Youtube channels that have stock videos everywhere, it's such a drag.

[currypablo]

I stopped indexing, not because it doesn't work but that most S&P 500 index funds havenlow dividend yields even though they appreciate.

Living in 🇨🇦 I invest in bank and energy stocks as they pay hefty dividends, hence providing me great income in my golden years.

[chriskabanda]

Profitable retail Traders can beat s&p return 10 fold and more

[CalmerThanYouAre]

Not that hard to beat the S&P... 50% SCHD and 50% SCHG, rebalanced annually, for example. Indexes that screen better quality companies from a fundamental standpoint than simply grabbing the "500 largest" by market cap. Sustained earnings growth and shareholder yield are always going to be paramount.

Options strategies also provide a great market-beating opportunity, especially when used as part of a core-satellite strategy. 75% SCHD/SCHG and 25% devoted to individual options positions, for example.

[snefmui]

why you cant even beat SP500?
anybody got a brain can beat SP500
just buy when everybody's selling and sell when everybody's buying
started investing 2020/09 as of 2023/06 im up like 30% after paying tax(should be like 40% if 0% tax)
if i bought SP500 im up only 25% and if i cash out i pay tax so that's only 20%