Why Assuming A 10% Average Return in the S&P 500 is Misleading
Statistically correct; Psychologically inaccurate
Disclaimer: This post is not financial advice. Individual investment outcomes and results may vary.
If you’ve ever tried to learn about investing, you’ve probably heard of “the market”, as in “trying outperforming ‘the market’”. When people use this phrase, they are typically referring to the S&P 500 Index.
The S&P 500 Index
The S&P 500 Index, or Standard & Poor’s 500 Index, is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. The index actually has 503 components because three of them have two share classes listed.
It’s a great place to start because it requires little to no active management.
Why? Because the list is actually updated periodically. Over time, it keeps companies that are showing positive growth/higher market cap, and removing companies for reasons such as falling below the market capitalization minimum of $8.2 billion, getting delisted from an exchange, etc.
