Outperforming the S&P 500 in 2020

 From the desk of Dan Seder:


Are We There Yet?

When researching family vacations, I determined it’s precisely 1,169 miles from my house to Disney World in Orlando, Florida. If we pack a cooler and take one bathroom break along the way, it should take me about 10-hours to drive door-to-door. The math is simple, I’d need to drive 120-mph.

Let’s assume I avoided jail time and/or a fiery crash along the way. Would I be applauded as a father for this record-breaking travel time? Not even close. Most would consider my trip reckless and irresponsible. In fact, if word got out I might even expect a visit from social services.

As a responsible parent, my trip would more realistically include driving the speed limit, slowing down during thunderstorms in Georgia, hitting multiple rest stops to stretch our legs, lunch and/or dinner and an overnight stay at a hotel equipped with a pool. According to Google Maps, that would include over 17-hours of road time alone. This trip is much slower, but I know it’s the prudent thing to do.

Fast and Furious

I often think of the 10-hour driving scenario when clients compare their 2020 performance to the S&P 500.

As of 12/31/2020, the S&P had a weighting of 27.61% in the Technology sector. Tech more than doubled its closest competitor in Health Care at 13.46%. When adding back the following former Tech behemoths that were reclassified into other sectors, you’re closer to 40%:

Not only is the S&P 500 overweight Tech stocks, but the entire Tech sector had a blowout year - returning nearly 42%. These five companies alone accounted for roughly 60% of the return of the S&P 500:

Let’s face it, to beat the S&P 500 in 2020 you needed to grossly overweight Technology - likely more than 40% of your portfolio. In addition, you needed to ignore any/all signs of danger (i.e. the COVID tsunami). This meant pedal to the metal even when conditions called for you to slow down. You had to put your family and your financial future at risk.

Investors who took this approach and survived shouldn’t confuse brains for being lucky. Smart drivers don’t get their families to Disney in 10-hours.


Expressions of opinion are as of this date and are subject to change without notice. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. The S&P 500 Index is a market capitalization‐weighted index of 500 widely held stocks often used as a proxy for the stock market and chosen based on market size, liquidity, and industry group representation. Individuals may not invest in any index. Every investor's situation is unique, and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Past performance does not guarantee future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that any statements, opinions, or forecasts provided herein will prove to be correct.