Wealth Management Firm Near Me - Facebook Icon IMG  Wealth Planning Near Me - Certified Financial Planners Twitter Icon IMG   Find A Financial Advisor Near Me - Wealth Planners Linkedin Icon IMG 


Access Your Account Online

☰ Menu
Planning & Economy

Week of March 20, 2017: Beating the Index

March 22nd, 2017

There’s so much written and re-written about what it takes to outperform the index. Or, the inevitability of never being able to outperform and thus settle for the performance of the index, minus fees. For the purposes of this brief discussion let’s agree that the index is the Standards and Poors 500, a representation of America’s largest companies as defined by their stock prices.

So why should you care and is it important to you?

It is often reported that the great majority of all large cap mutual fund managers post smaller returns than the index (USA today, March 14, 2016). S&P Dow Jones’ SPIVA® U.S. Scorecard reports that over a ten-year period, “…85.36% of large-cap managers, 91.27% of mid-cap managers, and 90.75% of small-cap managers failed to outperform on a relative basis”. Dismal, Isn’t it? However, if you segregate out the style of investing, value versus growth, for example, the statistics change: 32% of managers outperformed the S&P Value benchmark. Still kinda wimpy, isn’t it.

So, in golf what is the index, par? In professional golf the index seems to be the expense break-even point: How many PGA golfers, just break-even: That is, make enough money to pay for expenses. 73 out of 250 pros made more than $50,000* = 29%. How many golfers, pro and amateur alike break a score of 80% = about 2%**. How many break par? Winning is not about breaking par. Winning in golf is about having the lowest score at the end of the round.

There a lot of golfers and a lot of mutual funds, some are exceptional. Some of the criteria by which we select money managers for our clients may surprise you. Since it is very well known that past performance is not indicative of future performance, that is probably not the best metric by which a to select potentially superior money management.

Beating the index – So, should you care and is it important to you? I may teach you to make par, but you may never win a game of golf. But if I teach and help you to win wouldn’t that be the goal?

As financial advisors, our CERTIFIED FINANCIAL PLANNING ™ professionals, are devoted to helping our client families win the game of life. Our Family Wealth Planning Process is structured to assist our clients on developing their own index, their own measure of par, and the ability to meet their needs over a lifetime = winning.

The Family Wealth Planning process may be reviewed at — https://windsorwealth.management/wealth-management/

Carlos Dominguez, CFP® – Portfolio Manager


Sources: SPIVA® – U.S. Scorecard, S&P Dow Jones Indices, *https://www.dispatch.com/content/stories/sports/2013/08/13/rob-oller-column-breaking-80-puts-him-in-golfs-top-2-percent.html, **https://www.nytimes.com/1981/07/19/sports/on-pga-tour-breaking-even-is-as-crucial-as-breaking-par.html?pagewanted=all

Links are being provided for information purposes only. Raymond James is not affiliated with and does not, authorize, or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.

Past performance may not be indicative of future results. The S&P 500 is an unmanaged index of 500 widely held stocks that is considered representative of the U.S. stock Market. Inclusion of these indexes is for illustrative purposes only. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Any opinions are those of Carlos Dominguez and not necessarily those of Raymond James. This material is being provided for information purposes only and is not a complete description, nor recommendation. The information has been obtained from sources considered reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Securities offered through Raymond James Financial Services, In., Member FINRA/SIPC.  Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Windsor Wealth is not a registered broker/dealer, and is independent of Raymond James Financial Services. Raymond James financial advisors may only conduct business with residents of the states and/or jurisdications for which they are propertly registered.  Therefore, a response to a request for information may be delayed.  Please note that not all of the investments and services mentioned are available in every state.  Investors outside of the United States are subject to securities and tax regulations within their application jurisdications that are not addressed on this site.  Contact your local Raymond James office for information and availability. Links are being provided for information purposes only.  Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.