How can I outperforme the SP500?

Question

80% of professionally managed mutual funds fail to outperforme the sp&500 index. However, most of the professionally managed funds are too big to catch on small caps with solid balance sheets due to their minimal impact on multi billion dollar portfolios. With a small portfolio you are much more flexible, therefore, how is it possible to outperforme the market?

Answer 1

There are many ways to outperform the SP500. Here's a pretty straightforward one.

Buy QQQQ's or DIA or XEO/SPX and you're already managing your portfolio of 30 to100 stocks. Just keep them, and you're already matching the market and beating over 75% of the mutual funds out there (80 by your stats!)!

Ok, continuing on.

Now that you're already doing what many managers who underperform you get paid hundreds of thousands of dollars to do, would you like to beat them?

Here's how!

Covered calls.

So now you own DIA (dow 30 ETF) and it's been trading say around 115. You could sell options on the 120 or some way out of the money point to squeeze another 1-2% or so a month (depending how aggressive you are).

If you get called out, you're doing well (in this case 5/115 + the premium for the month that you got for the option you sold), but since 90% of options typically expire worthless, that 1-2% is now additional income on top of matching the performance of the market!

You are now beating the market!

No strings, no gimmicks, no magic wands, no smoke and mirrors. Just education.

Knowledge, discipline, and execution is the difference. You can do it too!

If you have any questions, just let me know.

I hope that helps!

P.S. And yes, you can do even better than this, but education is the key. You don't know what you don't know until someone tells you what you don't know! :-)

Answer 2

Of course, there is no good answer to this question.

However, I will venture one.

For the last few years, you should have been investing your money in real estate instead of the stock market. Now, you need to put your money into the next bubble. The problem is "which bubble?"

Diversity is the key. By that I mean, invest in other markets other than stock. Attempting to investing all of your money in the stock market and hoping to beat the index will be a losing proposition.

Instead, be liquid, and go in and out of the market as parameters change.