The great majority of mutual fund managers, hedge fund managers and amateur investors underperform the S&P 500. But it is possible to outperform the market substantially and over long periods of time. Just look at the great investors like Warren Buffett, John Templeton, Peter Lynch and others.
The benefits of outperformance over the long term are significant:
If you invested $10,000 in the S&P 500 when Warren Buffett took over at Berkshire Hathaway in 1964 and reinvested all your dividends then you would have about $2.6 million today. This is a lot of money! But nothing compared to the $376 million today, if you had invested the same amount in Berkshire Hathaway over the same period. That’s a significant difference of approximately $373 million more!
But why can these successful long term investors beat the market and create so much wealth while professional money managers and amateur investors can’t even beat a simple index?
There are 3 simple ingredients for success: knowledge, optimism and patience. It is as simple as that.
Sven Franssen