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Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years

Welcome new user, I will take a crack at explaining this. It is a good question and it's a very common misapprehension. I think the shortest possible explanation is this: You see how you said ".....
Fattie's user avatar
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90 votes
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Why does this author claim that buying index funds will decrease index funds returns?

Though Mr. Kratter does appear to have a financial incentive to suggest that index funds are likely to underperform going forward, he is also making a legitimate criticism of index investing. The ...
Justin Cave's user avatar
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52 votes
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Are Index Funds really as good as "experts" claim?

I actually love this question, and have hashed this out with a friend of mine where my premise was that at some volume of money it must be advantageous to simply track the index yourself. There some ...
quid's user avatar
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51 votes

At what point do index funds become unreliable?

A great deal of analysis on this question relies on misunderstandings of the market or noticing trends that happened at the same time but were not caused by each other. Without knowing your view, I'...
farnsy's user avatar
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48 votes

Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years

Hindsight is 20:20. companies like Google, Facebook, Netflix, Amazon, Apple have all increased anywhere from 3x-6x in value in the past 5 years. ...while at the same time, companies like General ...
Philipp's user avatar
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46 votes

Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years

It really depends on what you mean by "hard to outperform the S&P 500". Consider a roulette wheel. In a certain sense, it's easy to make money at a roulette wheel. The strategy is very ...
Tanner Swett's user avatar
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43 votes

Why does this author claim that buying index funds will decrease index funds returns?

Googling "Matthew Kratter", and the first result is a "Trader University", with text: Hi there! My name is Matthew Kratter. I am the founder of Trader University, and the best-...
timday's user avatar
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34 votes

Are Index Funds really as good as "experts" claim?

Why would it not make more sense to invest in a handful of these heavyweights instead of also having to carry the weight of the other 450 (some of which are mostly just baggage)? First, a cap-...
Hart CO's user avatar
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32 votes

Why do banks give small APR loans

Why do banks loan money to people (for housing, cars, etc.) at 4% and below ? Because loans for specific items are "secured" against those items. You don't pay on that car loan, the bank comes to ...
quid's user avatar
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32 votes
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Why don't index ETFs use leverage to offset their fees and eliminate tracking errors?

Leverage can be good to increase gains, but it amplifies movements of a stock. Also downward movements. Paired with the increased gains is also an increased risk, and that changes the investment ...
amon's user avatar
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29 votes

Are the S&P 500 and Dow Jones Industrial Average securities?

Index is not a security, index is a math formula. You can't buy an index. There are funds that track the indexes and are trying to reproduce the asset mix that would be created by following the ...
littleadv's user avatar
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28 votes
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Is buying an index ETF which contains my company insider trading?

First of all, insider trading is only illegal when you have material, non-public information that affects your trading decision. So if you do not have any pertinent information that could be ...
D Stanley's user avatar
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27 votes
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Pros and cons of investing in a cheaper vs expensive index funds that track the same index

As has been pointed out, one isn't cheaper than the other. One may have a lower price per share than the other, but that's not the same thing. Let's pretend that the total market valuation of all the ...
user's user avatar
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27 votes
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Do I understand correctly that while index funds (based on S&P or Dow Jones) generally go up, it might take a decade?

Historically, 20 year market returns have always been positive but there have been a number of 10 year periods where it lost money. The most recent one was from 2000 to 2009 and is called the Lost ...
Bob Baerker's user avatar
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25 votes
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Do index funds really have double-digit percents annual return rates?

The US* and the rest of the world suffered a severe bear market in 2008-09. The very high returns in the years immediately after that represent the recovery from that market collapse (some of my own ...
jamesqf's user avatar
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23 votes

How does dividend work in an index fund?

They are distributed to investors much like any other mutual fund, same thing with capital gains, although those distributions tend to be lower in value. Here is some info from the Fidelity S&P ...
Pete B.'s user avatar
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23 votes

Is it wise to keep some savings in a cash account to protect against a long term market crash?

Our thinking is that, if there's a long term market crash (e.g. Great Depression) and the value of our index fund plummets, People were having these exact same thoughts 10-11 years ago after the ...
RonJohn's user avatar
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22 votes

How do I invest in the S&P 500?

The S&P 500 is a stock market index, which is a list of 500 stocks from the largest companies in America. You could open a brokerage account with a broker and buy shares in each of these ...
Ben Miller's user avatar
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20 votes

Why don’t index-tracking mutual funds corner themselves?

There are several things to keep in mind: First, as Dilip's answer says, there are many indices, with different aims, so the number of "hot" stocks that someone would need to potentially target is ...
TripeHound's user avatar
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20 votes

Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years

The stocks you mentioned are pretty good. So is a Nasdaq index fund, which has had double the returns of the S&P 500 over the past 5 years. The Nasdaq has a solid record of beating the S&P ...
Phil Frost's user avatar
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19 votes

Are social/responsible stock funds pointless?

It's not just about the ethics of investing in these companies. What if you believe (either hypothetically or with supporting evidence) that companies that show good environmental and social ...
D Stanley's user avatar
  • 136k
19 votes
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Why do banks give small APR loans

Why does the bank not invest their money in the stock market rather than loaning it to people? (Aside from other points made about secured vs unsecured loans and regulations) As to why your local, ...
Jeutnarg's user avatar
  • 559
19 votes

Investing in S&P500 Index Fund from India

Can I invest in S&P500 Index fund, while residing in India You can invest in US funds. Under the Liberalized Remittance Scheme one can invest up to USD 250,000 per year. Option 1: Open an ...
Dheer's user avatar
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18 votes

Are Index Funds really as good as "experts" claim?

Picking yourself is just what all the fund managers are trying to do, and history shows that the majority of them fails the majority of the time to beat the index fund. That is the core reason of the ...
Aganju's user avatar
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18 votes

Why is the expense ratio of an index fund sometimes higher than its equivalent ETF?

Because funds of different share classes are there to cater different account sizes. The actual equivalent of VTI is Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) if account size is &...
base64's user avatar
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18 votes

Do I understand correctly that while index funds (based on S&P or Dow Jones) generally go up, it might take a decade?

There are no guarantees on either the short or long term that any investment will continue to rise. That has just been the general trend historically. You can always take any two arbitrary dates and ...
JohnFx's user avatar
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18 votes

Is investing in S&P 500 a wise choice if you plan to purchase a house in 10-15 years?

I am not checking your math. I as assuming that you feel confident that if you start with 50K, add 5K a month, that in 10-15 years you can have $1,000,000 after taxes. All this is to be able to put $1,...
mhoran_psprep's user avatar
17 votes

Why do people claim that it's hard to outperform the S&P 500? It has only increased in value by ~1.5x in the past 5 years

One aspect of the misunderstanding that no one has really mentioned yet: It seems like any reasonable person 5 years ago should have been able to realize that Google, Apple, et. al. would do well and ...
Jared Smith's user avatar
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16 votes
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S&P 500 constituent holdings not proportional to market cap?

The weights of S&P 500 constituents are rebalanced quarterly (every three months). In between the rebalances, the ratio of index constituent weights may differ from the ratio of their actual ...
Flux's user avatar
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