Why Beating S&P 500 is so Hard Long-Term
The S&P 500 is widely used as an investment benchmark to beat. But, 90%+ active fund manager fail to beat the S&P 500. In this video, I cover several reasons why beating the S&P 500 is so hard, especially over a long-term investment horizon. For this reason, Vanguard S&P 500 ETF (VOO) or its close sibling Vanguard Total Market ETF (VTI) should be the core holdings of any small investor portfolio.
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BOOKS RECOMMENDATIONS:
If you are still interested in trying individual stock picking, here are my top 5 books that made a big difference in my understanding of the stock market:
1. "The Most Important Thing" by Howard Marks
► https://amzn.to/49X87Fs
Excellent generalist book on investing. It helped me appreciate the risk/reward relationship as well as why "second-level thinking" is so important in stock research.
2. "Investment Valuation" by Aswath Damodaran
► https://amzn.to/43paAWP
This is my favorite book on investment valuation. Prof. Damodaran is very well-known for his teaching of corporate finance and valuation at New York University. I took many of his free online classes and often consult this book when analyzing a company.
3. "One Up on Wall Street" by Peter Lynch
► https://amzn.to/3x29ZOE
This is a fairly easy book and is an excellent intro to investing in individual stocks. Peter Lynch emphasizes knowing your turf and industry where companies operate. The book is not very technical, but it is still an excellent read even today.
4. "Common Stocks and Uncommon Profits" by Philip Fisher
► https://amzn.to/49Z2CWA
Recommended by Warren Buffett, this book is a classic read on growth investing. Fisher covers many things on how to find great growth stocks that could grow for a very long time. In this book, Ken asks a series of questions and treats them like a lens through which he analyzes stocks.
5. Valuation by McKinsey & Company
► https://amzn.to/495TFJL
To me, this book is like a bible on investment valuation. It has it all. Lots of practical advice with many examples. Written by practitioners for practitioners. The book is thick and is not an easy read. But, it helped me tremendously to advance my analytical thinking and investment valuation skills.
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Timestamps:
00:00 - Intro
00:26 - S&P 500 Stock Selection
02:02 - Finding Winners is Hard
04:15 - Timing Markets is Difficult
05:42 - Warren Buffett's Take on Investing in S&P 500
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This video content is for informational purposes only and should not be viewed as legal, tax, investment or financial advice. Please, do your own due diligence, consult a professional and keep your money safe.
#sp500 #etf #investing
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