I often refer to the S&P 500 on these pages. It is an index of the largest 500 US stocks.
This is because, as far as investing is concerned, the S&P 500 is The House. It is the standard by which all other investments are measured.
This is not because an index fund based on this particular index is necessarily the best. One that is even broader, encompassing thousands of stocks or perhaps including international stocks, might better suit some investors.
Rather, the S&P 500 is the house because (a) it is the biggest game in town, featuring the world's largest companies, (b) it is the most well-known index, (c) it has excellent statistics and charts available going way back, and (d) its size and importance makes it a good proxy for how well stocks perform in general. Many other stock market indexes closely correlate with the S&P.
If you want to know how well some other investment option has historically performed, you must ask: compared to what? And the 'what' will be the S&P 500, just as you'd compare the carbohydrate content of sorghum against wheat or the strength of chromium against steel. It is the bog-standard investment everybody knows and understands, it's been around for a long time and it is as mainstream as you can get.
The Holy Grail of investing is to beat this index.
We know that a few manage to do it - Warren Buffet, some lucky geeks who sold their crypto just in time and so on. It is physically possible.
We also know that very few actually manage to do it. The average investor underperforms the S&P because he buys high and sells low rather than buying and holding for the long term.
In this post we'll analyze various investment options spruiked by some as index-beating miracles and see how well they do. The results may be surprising.
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