Investing: Beating the S&P 500

[agardini]

All I'm saying is that since the election to now, my 401k is up 42%. This is when the stock rally really started to happen. The most of this rally was based on just the election results and speculation. The tax bill did happen, but that was already built in to the market.

The market cannot sustain this over the next year. A correction is due. Along with a recession. On that note I was reading an article that the Fed is nervous for a recession as the levers they usually pull to thwart the effects of a recession are not there. Lower interest rates, well the rates are still very low. Quantitative easing, fed still have all that on their books from the previous ones. What's the next thing they could do?

 

[Bestaluckcy]

I am of the opinion that a correction is very likely, but a recession still doubtful. The economy both at home and abroad is doing well enough that recession is unlikely. I think the fed tightening has a ways to go before it fouls the punch bowl. Some outside influence would be needed to change this. There are possibilities, such as bitcoin contagion, but they are not obvious yet.

As far as beating the S&P 500, the only thing I could suggest is consider using selective margin or credit purchases, after market setbacks. This would be a form of increasing your risk, and hoping the market would compensate you for taking increased risk in an amount greater than your cost of capital. As the years have gone by, indexing has made out performance tougher to accomplish. Good luck in your efforts.

 

[Dopey]

At this point, dow at ~26,000 consider going in light to start, dollar cost averaging going forward i.e. (putting in a set monthly amount every month). This market cannot keep going at this pace. Bubble alert. I'm not selling but I'm not buying right now.

Keep saying it, you'll eventually be right. The problem is, people have been saying it for 5 years and have missed out on a lot of returns along the way.

 

[BCClone]

All I'm saying is that since the election to now, my 401k is up 42%. This is when the stock rally really started to happen. The most of this rally was based on just the election results and speculation. The tax bill did happen, but that was already built in to the market.

The market cannot sustain this over the next year. A correction is due. Along with a recession. On that note I was reading an article that the Fed is nervous for a recession as the levers they usually pull to thwart the effects of a recession are not there. Lower interest rates, well the rates are still very low. Quantitative easing, fed still have all that on their books from the previous ones. What's the next thing they could do?

Get serious about bank reserve requirements again.

 

[dmclone]

I rarely mess with my 401k, which has been about 60% invested in the the S&P500 for the last decade.

For my wife's IRA I've had this mix for the last 5 years or so

VTHRX-Vanguard Target Retirement 2030 Fund Investor Shares-30%
VWELX-Vanguard Wellington-20%
VGTSX-Vanguard Total Internation Stock-10%
DODFX-Dodge and Cox International stock-10%
VTSMX-Vanguard Total Stock Market-10%
BRK.B-10%

Then I play around with the remaining 10%. I've noticed that the money that I play around with has not done nearly as well as the others above. For every 30% short term gain I've had, I follow it up with a loss.

For my Roth IRA I have this mix

VFINX-Vanguard Index Trust 500 Index-60%
SDOG-ALPS Sector Dividend Dogs ETF-25%
O-Realty Income REIT 15%


Looking back, I would have been best served by going 100% S&P, set it and forget it. In the last 5 years, the S&P has outperformed every single fund I have listed although some like the 2030 have less risk. At my age, I think I really need to start looking more at bond options.

 

[blizzisu]

Beating the S&P 500 is very difficult to do. Only 1 out of 20 actively managed funds can beat an index fund. https://www.marketwatch.com/story/w...-funds-beat-the-sp-than-we-thought-2017-04-24

Unless you are smart enough to be running hedge fund, I wouldn't even try to beat the S&P 500. For us common folk, the only viable strategy is saving as much as we can for as long as we can and hope the markets treat us well over our working years. I personally use the cheapest index funds I have access to and don't forget to always take advantage of any employer match.

 

[Cyclonepride]

It is high-ish but I don't think I'd call it a bubble. We will probably see a correction this year and unless a war breaks out or something I wouldn't expect a crash.

Bonds have been such a ****** investment for years that more money has been going into the equities market inflating prices some.

If you're operating from a picture of normal market health, I'd agree. I'm not. I think values have been artificially propped up by economic (and monetary) interventions, so there's some rot there. No idea how much, but that's my belief.

 

[ArgentCy]

Nah I was thinking we more just sit around, sip on bourbon and talk about the markets.

That's kind of the direction that I'd like. But the old reasons for actually forming these clubs was to pool your money to buy stocks / diversification that wasn't available to small investors. I know for example the first stock that I bought in ~ middle school (technically not me as it was my dad as the custodian) cost over $100 in commission for only 100-200 shares. You couldn't buy small lots (<100 shares) and the fees were high. That incentive has pretty much disappered these days.

 

[Gunnerclone]

I would love to have an etf/low priced stock investing club. That would be a ton of fun to meet and set strategy, pool some money, keep it simple and see what happens. Plus if it was all ISU alums/fans that would be even better.

 

[ArgentCy]

I would love to get together at one of the many fine breweries around Des Moines and talk stock but the 2 hour drive is probably out of the question.

You know, in my research there is an app that I tried to get some of the old fogies in the club. It's in the early stage and doesn't work fantastic but it creates either a hypothetical $100k trading account. We've only done a couple things as not many use the thing. But the idea is that anyone in the club can propose trades, discuss the reasons, and then everyone gets to vote on whether or not to approve. It's Voleo SimuTrader.

 

[canker2323]

Beating the S&P 500 is very difficult to do. Only 1 out of 20 actively managed funds can beat an index fund. https://www.marketwatch.com/story/w...-funds-beat-the-sp-than-we-thought-2017-04-24

Unless you are smart enough to be running hedge fund, I wouldn't even try to beat the S&P 500. For us common folk, the only viable strategy is saving as much as we can for as long as we can and hope the markets treat us well over our working years. I personally use the cheapest index funds I have access to and don't forget to always take advantage of any employer match.

You could beat the index if you invested in an equal weighted portfolio of S&P 500 companies.You miss out on potential gains from more volatile small cap companies in a cap weighted portfolio. When the returns for the S&P 500, or any other index, are displayed they are market cap weighted.

Portfolio managers don't do this though and most aren't measured against the S&P 500. They are usually measured against a Russell or MSCI index.

 

[mywayorcyway]

It can be beat, but very few actually do. I use the "be the market, don't beat the market" approach*.

* Excluding a small chunk of change in a Fidelity account. I prove time and time again that it can't be beat.

 

[ISUCyclones2015]

I love these threads.

We should start a CF investment club.

I used to be a member of a forum that had a vbulletin plugin that allowed for stock trading. You got so many dollars for joining, so many dollars for posting, so many dollars for likes etc. Not sure if it is supported for vbulletin 5 but would be a cool addition to our sportsbook

 

[cdekovic]

Nah I was thinking we more just sit around, sip on bourbon and talk about the markets.

As long as the bourbon is from the Diageo (ADR) family of fine spirits, I'm in!

 

[Jmarsh13]

Warren Buffet made a $1 million dollar bet with an active hedge fund manager that a S&P index fund would outperform a basket of actively managed hedge funds of their choice over 10 yrs. He won going away at 7.1% annual return vs. 2.2% annual return.

He even won more because the bonds they invested in to get the $1 mil took the $320k original amount and went to $2.2 mil in 10 yrs.

 

[DurangoCy]

I am of the opinion that a correction is very likely, but a recession still doubtful. The economy both at home and abroad is doing well enough that recession is unlikely. I think the fed tightening has a ways to go before it fouls the punch bowl. Some outside influence would be needed to change this. There are possibilities, such as bitcoin contagion, but they are not obvious yet.

As far as beating the S&P 500, the only thing I could suggest is consider using selective margin or credit purchases, after market setbacks. This would be a form of increasing your risk, and hoping the market would compensate you for taking increased risk in an amount greater than your cost of capital. As the years have gone by, indexing has made out performance tougher to accomplish. Good luck in your efforts.

I like your style. I'm trying to get some cash on hand now. I did some of the leveraged buying in 09-10, but was in too speculative of equities. If it crashes again, I'll probably try the same thing, but probably just with the S&P 500 to try and pull a few extra points out of it.

I also want to start building up some rental homes, so I think the next recession will be a good opportunity for that. I wasn't in a position last time, but will be if/when it happens again.

 

[blizzisu]

You could beat the index if you invested in an equal weighted portfolio of S&P 500 companies.You miss out on potential gains from more volatile small cap companies in a cap weighted portfolio. When the returns for the S&P 500, or any other index, are displayed they are market cap weighted.

Portfolio managers don't do this though and most aren't measured against the S&P 500. They are usually measured against a Russell or MSCI index.

This is interesting. Do you have any links to research that shows how much better a equal weighted portfolio performs compared to cap weighted?

 

[canker2323]

This is interesting. Do you have any links to research that shows how much better a equal weighted portfolio performs compared to cap weighted?

Not really research per se.

https://www.forbes.com/sites/invest...ighted-which-approach-is-better/#760fa68647c3

Also, vanguard offers other index funds that out perform the s&p 500.