Category Archives: Q&A

Q&A: What Portfolio Would Outperform the S&P 500 Over the Past Ten Years?

What Portfolio would outperform SP500 in the past 10 years? My wife has about $120K to invest in her IRA account. We’ve looked at various portfolios out there to either use or model after, but we’ve been disappointed to find that nearly all of them underperform the SP500. And when the market crashed in 2008, all the portfolios also crashed. It nearly seems like the portfolios are merely an underperforming version of the SP500? Can someone explain or point to portfolios that either performed better than SP500 or made it through much better during the crash of 2008?

Despite ubiquitous warnings that “past performance does not guarantee future results,” questions like yours are very common. It’s part of being human. We have an instinctive tendency to judge recent events as more valid than older events. This is known as “recency bias” and has been tripping up investors throughout history.

Finding a portfolio or strategy that would have beaten the market over the last ten years is pretty easy – off the top of my head, any combination of gold and emerging markets would have worked. They both outperformed the S&P 500 over the last decade pretty handily. Of course, this is information that would have been very useful to know ten years ago.

If you are looking at investing a lump sum today, it’s the next ten years you have to be concerned with and hindsight isn’t much help here. Rather than trying to predict an unknowable future, let’s focus on a couple of priorities that are achievable: Continue reading