Beating the S&P 500

Nov 2nd, 2007 | By Christopher Hancock | Category: International, Investing Strategies

Bernanke cut rates once again. Markets responded. The Standard & Poor’s 500 Index rose an admirable 1.2%. Investors cheered.

The S&P, the world’s benchmark index, has returned just over 9% year-to-date. That’s not half bad.

But how much money are you really making if your portfolio “beats the market?”

Unfortunately, beating the S&P has become like a golfing handicap, a number that gets bandied about, and maybe embellished a point or two, to impress any financial “mind” polite enough to listen.

The reason is simple… For most, investing has become a game…a competition…a proverbial fight to the finish that separates the winners from the losers.

But why does the S&P serve as the lone benchmark?

When the annualized returns (in local currency) of the most world’s 23 most developed markets are stacked up against one another, beating the S&P looks about as impressive as the Pittsburgh Steelers beating the Pittsburgh Panthers:

When you break down the three- and five-year returns of the 23 most established world markets, the results are even more intriguing:

Again, I ask: How much money are you really making if your portfolio “beats” the market?

For better or for worse, the markets are global today…

Even the companies representing the Standard & Poor’s 500 Index now derive 49% of revenue from foreign markets, up from 30% in 2001.

Meaning, a vote for the S&P also means a vote for globalization.

So if the next time your broker assures you he can beat the S&P, you may want to listen. It shouldn’t be that hard. The trick: Buy just about any other developed market index but the S&P.

Until Next Time,
Christopher Hancock
November 2, 2007

P.S.: That’s just what I provide my Free Market Investor readers — opportunities for profits in growing markets all over the world. My readers are currently up on every single recommendation, including one that is holding at 116% higher than when it was recommended.

Christopher Hancock

Christopher Hancock lives and breathes emerging markets. He travels extensively and utilizes his contacts across the globe to recommend the best international investments in the world. After working with Citigroup in Hong Kong on the challenges and opportunities associated with the forthcoming RBM flotation reform, Christopher left many of his friends behind and decided to return to the States to pursue a career in equity research.

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