S&P 500 wins again!

[acroy]

What really gets me is that it does this with almost no trading cost, no effort.

http://www.marketwatch.com/lazyportfolio

I fancy myself a well educated and fairly sophisticated buy-and-hold investor. After all the countless hours of research, work and worry I have managed to stay about 1% over the S&P 500 long-term average.

**** it, I'm very tempted to just invest all my 'dry power'  into S&P index, and let it ride. Like the smart guys have been telling me for years!

[Scandium]

Once again the ghost of non-comparable benchmarks strikes! Several (all?) of those portfolios contain anywhere form 20% to 40% bonds. In addition to international stocks. Comparing to a large-cap, 100% equity, all-US index does not seem fair.

[Frugancial Advisor]

Once again the ghost of non-comparable benchmarks strikes! Several (all?) of those portfolios contain anywhere form 20% to 40% bonds. In addition to international stocks. Comparing to a large-cap, 100% equity, all-US index does not seem fair.

This. 100% equity index outperforming a balanced fund. This is to be expected. The real winners here are those portfolios with the lowest standard deviation, best performance relative to their blended benchmark, and what kind of expenses were incurred along the way.

Also, I find it extremely frustrating when investments are compared to the "S&P500" as if there is a 0% MER S&P500 ETF available. It would be more prudent to disclose that their will be an MER (however low it may be), or even use a sample ETF. It's no secret that index tracking ETF's very rarely replicate 100% of their underlying benchmark.

[acroy]

Yes there are imperfections to this comparison. I find it impressive none the less.
-SPY etf tracks S&P pretty closely. No not exact.
- iirc S&P500 revenue is something like 40% international. So it could be strongly argued that S&P has plenty of international exposure.
-Taxes are pretty darn simple.
-It currently yields over 2%, almost the exact same as a 10yr T-bill

[k9]

And then S&P 600 small caps value did even better, at 7.5% vs 6.5% for the 10 last years. Why not invest in S&P SCV 600 if CAGR is the only interesting criterion ?

Heck, the NASDAQ Biotechnology Index even returned 14.4% on this period. Stash was multiplied by 3.83, for a lame 1.88 with S&P 500.

Regarding non-stocks passive investments via ETF, Gold returned 8.7% on the same period, and that's counting a huge bear market since 2012.

Are you really sure you want to only consider CAGR on a 10-year period ?

[Easye418]

100% VTSAX baby. 

I am 26 tho.

Edit:  Sorry. I have like 15% in International Stock.

[milesdividendmd]

I agree that this is an utterly meaningless comparison.  Comparing a 100% US large cap fund at the end of a tremendous bull run in US equities is going to find that 100% US equities outperforms balanced portfolios everytime.

Ask yourself how the various CAGRs would have looked for a similar time period ending in 2008.  The list would be almost the exact opposite, I would guess, with the bonds and international equities improving the performance of all of the other diversified portfolios.

The problem with betting all of your money on the S&P is that it exposes you to US specific risk out of proportion to the US' contribution to the world economy.  And My guess is that you will not be paid for this idiosyncratic risk that you are taking.

[Tyler]

As others have mentioned, the timeframe makes a big difference.  In this chart, A is "Dr. Bernstein's No Brainer" portfolio from the site.  B is the S&P500. 



You can see from the bottom chart that the S&P500 looks better the last few years, but that really doesn't tell the whole story over an investing lifetime.  BTW, you can use the calculator here to adjust the start date, try this for other portfolios, or measure against a completely different benchmark.

[acroy]

I agree that this is an utterly meaningless comparison.  Comparing a 100% US large cap fund at the end of a tremendous bull run in US equities is going to find that 100% US equities outperforms balanced portfolios everytime.

Ask yourself how the various CAGRs would have looked for a similar time period ending in 2008.  The list would be almost the exact opposite, I would guess, with the bonds and international equities improving the performance of all of the other diversified portfolios.

The problem with betting all of your money on the S&P is that it exposes you to US specific risk out of proportion to the US' contribution to the world economy.  And My guess is that you will not be paid for this idiosyncratic risk that you are taking.

-Sure equities are with 10% of a 7-yr bull. Bonds are within spitting distance of a 30-yr bull. Which has more to loose? My crystal ball won't say.
-As noted, S&P gets something like 40% of revenue from international. So it is a very international index; with the added benefit of best the financial analysts the largest 500 companies in the US can hire performing currency hedging for you.
-Of course the rankings will flipflop depending on performance of various investment vehicles. The point is it's rather amazing that the straight S&P is still 'tha winnah' a lot of the time; at a fraction of the trading/expense costs and with zero worry or effort put into balancing, etc. Mustachianism is all about leveraging simplicity and the long-term view!

[hodedofome]

100% SPY is a great portfolio if you can live off the dividends alone. If you can't, I'm not comfortable with the risk of taking out a lot of principle in a sustained bear market.

[k9]

The point is it's rather amazing that the straight S&P is still 'tha winnah' a lot of the time; at a fraction of the trading/expense costs and with zero worry or effort put into balancing, etc. Mustachianism is all about leveraging simplicity and the long-term view!

The thing is, as I said above, it is not. There are many indices that beat S&P 500 on this 10 yr period and that usually beat it (small caps value, for instance, tend to perform much better than S&P 500 on a bull market). If you are scared by volatility, another winner is VTI (all US stocks), that did a little better on the long term than S&P 500 (101% vs 95%) with the same volatility. And, it is an even more "very international index".

As for 100% in a single stock index... If you really don't want to bother at all about rebalancing once in a year *and* you can stomach huge drawdowns *and* you don't care about benefiting from volatility and improved gains, then of course, go for it.

[milesdividendmd]

I agree that this is an utterly meaningless comparison.  Comparing a 100% US large cap fund at the end of a tremendous bull run in US equities is going to find that 100% US equities outperforms balanced portfolios everytime.

Ask yourself how the various CAGRs would have looked for a similar time period ending in 2008.  The list would be almost the exact opposite, I would guess, with the bonds and international equities improving the performance of all of the other diversified portfolios.

The problem with betting all of your money on the S&P is that it exposes you to US specific risk out of proportion to the US' contribution to the world economy.  And My guess is that you will not be paid for this idiosyncratic risk that you are taking.

-Sure equities are with 10% of a 7-yr bull. Bonds are within spitting distance of a 30-yr bull. Which has more to loose? My crystal ball won't say.
-As noted, S&P gets something like 40% of revenue from international. So it is a very international index; with the added benefit of best the financial analysts the largest 500 companies in the US can hire performing currency hedging for you.
-Of course the rankings will flipflop depending on performance of various investment vehicles. The point is it's rather amazing that the straight S&P is still 'tha winnah' a lot of the time; at a fraction of the trading/expense costs and with zero worry or effort put into balancing, etc. Mustachianism is all about leveraging simplicity and the long-term view!

S&P is a wonderful index. It's not hard to beat. Include some exposure to small stocks or value stocks or momentum stocks and you should expect outperform over long time horizons.

That being said the fact that the S&P gets 40% of its revenues from international markets is one of the least convincing arguments for not internationally diversifying that is commonly thrown out there.

If that is all that it takes to diversify internationally, then why not invest in international markets that get 50% of their revenues from the U.S.?  They are sold at a significant discount to the S&P presently, so why pay more for the same U.S. exposure?