How to Beat the S&P 500

The S&P 500 is a grouping of the 500 largest companies in America.  It is a very popular thing to invest in for many reasons.  First of all, it is made up of incredible companies that we all know and love like Google and Apple.   But, another reason is, the business and financial media puts a lot of emphasis on shoving the current price and up or down movement of the S&P 500 in our faces every single day. For people that don’t know as much about investing, why would they even think there is something else to invest in then the S&P 500.

We recently met with a young man that was investing in only a low cost S&P 500 index fund.  He could not understand how he could pay a higher fee for a diversified portfolio, and end up with a huge advantage long term.   Let me explain further.

There are over 13,000 total stocks in the world that are available to invest in.  So the 500 stocks in the S&P 500 make up less than 5% of the total stock market.  So you cannot really consider yourself diversified if you invest in only 500 stocks in one country that are all very large companies.   If you could, wouldn’t you want to be more spread out into different countries, different industries, and different sizes of companies.  That way when 1 industry or country has major issues, your portfolio isn’t killed.

I’m here to tell you it is possible to beat the S&P 500 in terms of annual return, be more diversified, and lower your risk (Standard Deviation) all at the same time.

The mountain chart below shows that 3 globally diversified Matson Money Portfolios, with risk levels below or similar to the S&P 500 have absolutely blown away the returns of the S&P 500 for the long term 15 year period of 2000-2014.  And the Matson Money Portfolios shown below are Net of Fees, meaning this is the return after all fees are taken out. 1.


As you can see, the S&P 500 (100% stocks) was well below the Balanced Growth Portfolio, (50% stocks, 50% fixed income) the Long Term Growth Portfolio (75% stocks, 25% Fixed Income), as well as the Aggressive Growth Portfolio (95% stocks, 5% Fixed Income).    If you invested $100,000 into the S&P 500, your gain would be $86,482 at the end of 2014, which is about half the $162,523 gain you would have received investing in the Aggressive Growth Portfolio with Matson Money over the same time period.

Although the S&P 500 is popular, and has been up lately, that doesn’t mean you can forget the long term projections and academic studies that have proved again and again that a efficient diversified portfolio beats the S&P 500 in the long term.

By Jimmy Hancock


  1.  Matson Money. IsSomethingWrongWithOurPortfoliosPowerpoint. N.p.: Matson Money Inc., 6 Apr 2016. PPT.

2 Replies to “How to Beat the S&P 500”

  1. Hi I live in South Africa. I have decided to move my investment offshore to the S&P500. Is it a good idea to invest all my funds in the S&P or is it more viable to diversify. Which countries are a good option. Thank You

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