Roughly 70% of all stock mutual funds invest in the exact same 500 stocks. These are the stocks in the S&P 500 Index.
Seven years ago (Jan. 2000), the S&P 500 stood at 1400. Know where the S&P 500 is today? Go ahead, take a look. It’s 1422.
The S&P 500 is a “weighted” index – meaning, it is heavily weighted (dominated by) the largest blue chip stocks around. And for seven years, those large stocks have floundered.
Now, large caps stocks are showing signs of life lately. But the real money has been made (and is still being made) in the small cap area.
In that seven year period, the S&P SMALL CAP 600 is up over 100%
And that doesn’t show any sign of slowing down.
The tools we use don’t predict what’s going to happen in the market. They only tell us “what’s happening now.” And that’s where we want to have our money – in what’s working now.
Those who practiced “buy and hold” the past seven years haven’t made any progress. Any many of them will blame “bad luck.” Or maybe a broken mirror.
They’re only seven years closer to the day they are going to NEED that money.