How to beat the S&P 500?
This article will help you understand how you can build the S&P 500. The strategy is very straight forward but there is additional risk.
Siddharth Lunawat
9/17/20251 min read
If you invested $10K in SPY on Jan 22, 2010 it would be worth $60,600 (with dividends $74,600). Now the big question is how do you beat SPY?
I, Siddharth Lunawat, believe if you are willing to take on some additional risk beating the SPY is very easy. Instead you bought top 10 holdings of SPY (by weight at that time). These would have been:
ExxonMobil (XOM)
Microsoft (MSFT)
Apple (AAPL)
Procter & Gamble (PG)
Johnson & Johnson (JNJ)
General Electric (GE)
Chevron (CVX)
Berkshire Hathaway (BRK.B)
JP Morgan Chase (JPM)
IBM
GE went bankrupt. IBM was peaked in 2013 but had negative returns till 2024. Exxon was also deadweight till almost 2024. JPM, Berkshire, J&J, PG and Chevron grew a modest 3 to 5x (below SPY). Apply and Microsoft however skyrocketed your portfolio. Apple and Microsoft skyrocketed your portfolio.
You would have today a grand total of ~120K today! Almost double SPY! This is the power of concentrated risk.
How do you apply this theory going forward? I would take part of your portfolio (a small part) and buy stocks that are in the top 10 today. Keep buying top 10 stocks every year and just let them ride. The concentration of risk on the top stocks enables you to grow faster than a generalist portfolio. This is a riskier strategy so 100% consult with your financial advisor first! In the use case from 2010 only two stocks saved the portfolio, what if it was zero winners that year?