Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 
 
Blog Home
Bob Carey
Chief Market Strategist
Bio
X •  LinkedIn
 

  When Less Can Potentially Bring More
Posted Under: Conceptual Investing
Supporting Image for Blog Post

 
View from the Observation Deck  
  1. If an investor seeks to outperform a benchmark index, such as the S&P 500 Index, one way to approach the challenge is to simply pare down the number of stocks one invests in.
  2. As indicated in the chart, over the past 12 years (includes 2008 to show impact of financial crisis), the average number of stocks in the S&P 500 Index with positive annual price-only returns (does not include dividends) was 321, or roughly 64% (currently 505 stocks in the index). That means that approximately 36% of the constituents in the index, on average, were providing a drag on returns in a given year.  
  3. One of the ways in which an investor might attempt to generate a return that exceeds that of a benchmark index is to identify and eliminate those companies most likely to end up in the red at year-end. Easier said than done.
  4. This is where professionals can add value for an investor. Financial consultants and packaged product vendors have a multitude of strategies designed to potentially outperform the broader market via less diversification.
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance. 

Download a PDF of this post, please click here.
Posted on Thursday, January 9, 2020 @ 2:14 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
Search Posts
MARKET ANALYSIS
Market Commentary and Analysis
Market Commentary Video
Monthly Talking Points
Quarterly Newsletter
Market Observations
Subscribe To Receive Email
 


 PREVIOUS POSTS
A Snapshot Of How Stocks Have Performed So Far In This Millennium
A Snapshot of Growth vs. Value Investing
2020 Should Be A Good Year!
Stock Buybacks by Sector
A Snapshot Of FDA Drug Approvals
S&P 500 Index Earnings & Revenue Growth Rate Projections (2020 & 2021)
U.S. Stocks Have Outperformed Foreign Stocks Since President Trump Was Elected
Checking in on the 10-Largest Stocks in the S&P 500 Index
Top-Performing S&P 500 Index Subsectors in 2019
How Stocks Have Fared In Presidential Election Years
Archive
Skip Navigation Links.
Expand 20242024
Expand 20232023
Expand 20222022
Expand 20212021
Expand 20202020
Expand 20192019
Expand 20182018
Expand 20172017
Expand 20162016
Expand 20152015
Expand 20142014
Expand 20132013
Expand 20122012
Expand 20112011

Search by Topic
Skip Navigation Links.

 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.