If investing is a game, then the SPDR S&P 500 (SPY) is the monster in the game to beat.
For a long time, I was a frog in a well, confining my investments to the Singapore market. Beating the index there proved to be relatively easy.
It took me 17 years of investing before I finally dipped my toes into the US market in 2017. It’s been a steep learning curve, but I’m definitely getting the hang of things!
I thought I had it figured out after exploring the market a few years. My initial success with my current portfolio lulled me into a false sense of security. Then came the gut punch. Over a 7-month stretch, from November 2021 to June 2022, the market delivered a crushing blow. My US portfolio plummeted from a soaring 95% gain to a stinging 9.5% loss by the end!
In comparison, the S&P 500 (SPY) only dropped 30% during the same period, falling from a 50% return to 20%. While significant, it pales in comparison to the devastation my US portfolio experienced.
This experience led me to decide to focus my investment in US market on larger cap stocks. Typically, these businesses are already in the black and have a strong balance sheet.
While investing in the smaller cap stocks can be very lucrative, I guess it is not my game. At least, not the main game. Not now.
The shift to large-cap stocks seems to be paying off. Since June 2022, my US portfolio has tracked the SPY more closely, albeit with slightly higher volatility. This makes sense, as large caps tend to be less volatile. However, with a few key technology giants like Apple, Microsoft, and Arista Networks, the portfolio’s performance received a boost from the recent rise of AI.
In February, my portfolio briefly matched the SPY’s return, but the lead was short-lived. Since then, it’s kept pace with SPY, and last Friday, it surpassed the benchmark again!
Will this outperformance continue?
I believe it has a good chance.
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