Beating an Index Benchmark Isn’t a ‘Plan’ – It’s Lazy Investing

Most experienced investors are familiar with the concept of “beating the market.” The financial and consumer media frequently speaks in index-relative terms, giving many consumers the (false) impression that if you are meeting or beating the S&P 500, your retirement is safe and sound.

Accordingly, there’s no shortage of wealth managers who build up their clientele on the promise of meeting or exceeding the market average over a long timescale. Unfortunately, when you factor fees, taxes, and other costs of doing business, meeting or beating an index doesn’t constitute a logical investing strategy. It’s simply lazy investing.

Still, because index performance an easy metric to conceptualize and reach, thousands of consumers fall in line every year, signing up for retirement plans that use indexes to determine behavior. Investor plans and behavior should be based on goals built around specific financial and life outcomes, such as realizing a percentage return on investment or producing a net gain capable of supporting you or your family’s future.

By tying performance metrics to outcomes and factoring fixed expenditures (such as taxes), your financial advisor can build a plan that both weights asset allocation – including stocks, bonds, cash, and other asset classes – in a specific and meaningful way, as well as incorporates readjustments at important timepoints. Choosing asset classes with the intention to only outperform an index may be less work, but it’s far more likely to generate modest (if any) returns.

Additionally, past market performance is a particularly poor indicator for future performance, making goal-specific planning and dynamic portfolio management critically important for maximizing your chance of investing success.

In both investing and in life, there’s no guarantees. Investors may be scared to set a concrete, aggressive profitability target for fear of failing – but in a market defined by risk and volatility, setting large goals and taking specific steps to meet them is a far better strategy than taking an overly-conservative approach based on meaningless past trends.

Partner with a wealth management expert that sets the right goals, not the convenient ones. Reach out to Cypress Private Wealth to find a strategic partner that has the experience, knowledge and patience to help you pursue your financial goals.


The opinions voiced in this material are for general information only are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.

There is no guarantee that an investment strategy will yield positive outcomes. Investing involves risk, including loss principal. The advisors of Cypress Private Wealth are Registered Representatives with, and securities offered through LPL Financial, Member FINRNSIPC. Investment advice is offered through Strategic Wealth Advisors Group, LLC, a registered investment advisor. Strategic Wealth Advisors Group, LLC and Cypress Private Wealth are separate entities from LPL Financial.

All indices are unmanaged and may not be invested into directly.

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