What Does it Mean to Beat the Market?
When traders and investors speak of “beating the market”, they’re typically referring to outperforming Standard & Poor’s 500 Index (S&P 500) – one of (if not the most) popular benchmarks of U.S. stock performance. The S&P 500 has returned approximately 10% per year on average (only about 7% when adjusted for inflation). It’s a diverse group of stocks chosen by economists (500 different companies in total) that essentially mirror the overall performance of large-caps.
Another popular benchmark that is often used to analyze if individual traders or fund managers have beaten the market is the Dow Jones Industrial Average – which tracks 30 of the most significant companies on Wall Street, including: General Electric, Disney, Pfizer, Apple, Coca-Cola, Nike, and Microsoft. Benchmarks like the S&P 500 and Dow Jones Industrial Average provide market participants with an efficient method of tracking overall market health. It also provides them with a goal to accomplish – is your portfolio beating the market year in and year out?
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Thanks for that. Even though I knew the definitions of those markets, It is interesting to now know what they are referring to when outperforming the market. This is valuable information if you can provide more detail on how to do that. I myself am undecided on what to invest in. Whether I should let my company take care of that with matching, or go about investing myself. Maybe I’ll do both at some point. Thank for the tip