Dividend Growth Investing, Retirement Income, Stock Market Investing, Uncategorized

What Is Beating the Market?

I often ask during a presentation, what did the S&P 500 do last year, in 2014? Often, someone knows the answer. In 2014, the S&P 500 appreciated in value by 11.4%. What does that mean in relation to anything else?

Well, first, 85% of all managed money did not meet its benchmark, its goal, its target. What is ‘managed money,’ and what was their ‘benchmark’? I’ve met people in the industry. Managed money is your institutions, like many thousands of mutual funds, primarily. And, what is that ‘benchmark’ that they almost all are being measured by? Well, the benchmark, target or goal of most managed money, by far, is the S&P 500 itself.

It stands to reason. After all, if all you did was to put all your investible assets into a low-cost index fund that mimicked and mirrored the S&P 500 as closely as possible… you’d be within the top 15% of all managed money! That’s actually why so many of those very low-cost S&P 500 index funds were established. It was learned that most managed money did not do as well as the market, so some smart individuals said, “Shoot, let’s just create a fund that IS the market. Keep our costs as low as possible, and we’ll have a ‘winner’!” And, so they did, and for the most part, they accomplish just what they set out to do. If you want to do at least as well as the market, buy an S&P 500 Index fund and be done with it. You’ll do at least as well as the market, and better than most managed money! I hope you knew that already.

But, this is where a specific strategy, and specialized ‘tools’ come into play. If there is a specific strategy that actually has been demonstrated and proven over time to outperform the market… And, there are specialized digital tools that can help you to implement that strategy… you are on track to become a true stock market winner!

My only point with this post is to demonstrate from actual experience the outperformance that can be gained by a specific strategy with tools. So, before I even go there, note this: The S&P 500 appreciated in value by 11.4% in 2014, but the average appreciation of all of my concentrated holdings that I held in 2014 was 13.9%. Stop. Do not think that 13.9% is just 2.5% better than 11.4%, as that would be to miss the point entirely, since 2.5 sounds like a such a small number. Think… 13.9 is 22% higher than 11.4. That’s right, the appreciation of the concentrated holdings of the portfolio held thru 2014 outperformed the S&P 500 by 22% in price appreciation. But there’s more!

The average dividend yield of the 500 issues in that index was 1.5% for 2014, whereas the average dividend yield of the specific issues in our portfolio was 2.6%. If we were to add the 1.5% to the 11.4% of appreciation, we get a total return on the order of 12.9%, which is a pretty decent number! But, on the other hand, if I add the 2.6% dividend yield to my average 13.9% appreciation, I now have a total return that looks more like 16.5%. Now, let’s do that math. 16.5% is almost 28% greater than 12.9%. Twenty-eight percent greater!

Now, pay very close attention. 85% of managed money did not meet or exceed its target… but, we did. And, there’s still more! It was reported that in 2014, 90% of all those hedge funds that you hear about, actually lost money last year!

Here’s the ‘takeaway’… as I previously stated as point number 2. This is not brain surgery or rocket science. You only need to know a very few basic, but vitally important, points or principles, and you, too, can handily beat the market, and chart your own path toward investment success. I will be stating, in the most precise terms, what that course is, and how you can chart it for yourself. It’s what I am all about! I want to be a blessing to you.

Here’s to your successful investing!
Harold F Crowell

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4 thoughts on “What Is Beating the Market?

  1. Donald Dickey says:

    Good Morning Harold, will be very interested in seeing how you chart or record the progress of your portfolio.
    Thank you for all the work you do and the information you forward to those of us who follow your work.

    don dickey

  2. Jonathan Glaser says:

    Harold

    I think you are putting too much emphasis on beating the S&P as a return figure. Are most portfolios based on the large cap S&P 500? Hopefully not as there would be too much concentration in US large cap, and not a proper balance. I would hope people would also have fixed income (bonds, rtf’s, preferreds) as well as a bit of international allocation at a minimum to have some sort of balance.

    Just a thought

    Jonathan

  3. Jonathan, agree with it or not, that is precisely how a great deal of manged money is measured by. The bogey for a greater portion of managed money is how it has done in comparison to the S&P 500. US large cap will be largely multi-national corporations, however, so there’s a lot more ‘diversification’ than you might be giving it credit. The problem becomes bringing the earnings home and converting them to US dollars.

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