An ongoing series of informational entries
THE BEST INVESTOR
January 1, 2019
Who is the best investor? This question is often debated and the names Warren Buffet, Peter Lynch and Jack Bogle always come to mind. There is no doubt the success of these gentleman and personally I have read all their books and listened to their interviews throughout the years. Sharpening your sword and stock investing skills is always a great idea and reading what they have to say is time well spent. However, at the end of the day you as an investor are the one left to pull the trigger on when and what stock to buy or sell. Unfortunately, these great investors aren't sitting next to you with one on one advice. So what is an investor to do to help with this process? Are their any investors that you can have access to every day to help you along? Well you are in luck. Its name is the S&P 500.
The S&P 500 is the beacon. It is the champion defending their title every year that investors face it on December 31st for a gut check to see how close they were to the returns of the S&P. The well known bet laid out by Warren Buffet against anyone that could beat the returns of the S&P 500 over a 10 year span. Guess what? No one could that tried. You will hear about stock funds that outperformed the S&P 500 for 5 years straight. That's great but my question is were those 5 years a bull market? I'm not being negative, my point is can these same analysts beat the S&P in a bear market? To me that is what counts. A portfolio that outperforms in either market. That is the secret sauce and few can accomplish it.
Ok so the S&P is the best so what is it? The S&P 500 is a stock market index based on market capitalizations of 500 large companies. It was first introduced in 1923 and tracked a small number of stocks. This index grew to 500 companies in 1957. Well what makes it so great? To me its the diversity within it. Its the sector weightings within it, its the quality of the companies within it. This formula is very hard to beat. Very. The average return over the life of the S&P is roughly 10% annual return on average. Very impressive.
All this being said you may be asking well how does this help me? My answer is everyday you can see whats within the S&P 500 and you can weight your portfolio with the same sector weights. There are many ways this best investor can help you design your own winning portfolio and in our next blog we will show you how...stay tuned...