The Best of Times, The Worst of Times – The S&P 500

Since 2010 the S&P 500 has been on a tear. Holdings in funds that mirror this index have done incredibly well. For those not familiar with the S&P 500, it is a market-cap weighted index of the 500 largest US companies. And this past decade, the big US companies have been kicking you know what and taking names!

The S&P 500 over the last 20 years

More than a few individuals I know have been shifting more and more of their holdings into large cap funds such as the S&P 500. However, when you look a bit deeper, you find out that this may not be quite as good of a long-term strategy as it might first appear. The following table tells a much different story. The table shows the returns for multiple indices from 2000 - 2009, 2010 – 2019 (June), and 2000 – 2019 (June):

Table: Comparing the S&P 500 with other asset classes

While the S&P 500 has been “killer” for the past decade, the prior decade and the TOTAL two-decade performance of the S&P 500 has been below that of the other indices.

So, what does this data tell us about the S&P 500?

Does this mean that the S&P 500 is “bad” or that it will underperform in the long-term? Absolutely not. However, I would argue that the past decade does NOT argue that the S&P 500 is “good” or that it will outperform in the long term!

In my opinion, the key to successful long-term investing is to have a well-defined strategy that is based on capturing market returns across globally diversified asset classes. History has shown that this approach yields solid results, and, accordingly, I choose to pursue this approach.

You can get a more detailed discussion of the performance of the S&P 500 by jumping to this link, which contains a PDF file going into more detail on this topic.

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Photo credit: Markus Spiske on unsplash.com