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What Are Your Goals?
MOST PEOPLE RECOGNIZE S&P 500 COMPANIES AS HOUSEHOLD NAMES!
We Will Examine the S&P 500, Because it is the TOP PERFORMER Over the Long Haul:
- Consisting of top companies providing products and services that the market wants and needs
- Continuously updated as laggards are dropped and the current best companies are added
- Outperformed over 90% of actively managed funds over the long haul
- Outperformed European and Asian stock indices over the last 10, 25 and 50-Year timeframes
the S&P 500 contains many of the world's strongest companies
10 largest companies
As of March 13, 2020, the 10 largest companies, with a weighted market cap, in the S&P 500 were:
- Microsoft Corp.
- Apple Inc.
- Amazon.com Inc.
- Facebook Inc. A
- Berkshire Hathaway B
- Alphabet Inc. A (GOOGL)
- Alphabet Inc. C (GOOG)
- JP Morgan Chase & Co.
- Johnson & Johnson
- Visa Inc. A
So how does someone outperform the S&P 500?
By Utilizing a S&P 500 Index Crediting Account
A S&P 500 Indexed Crediting Account earns the gains in the S&P 500 up to a cap, but loses nothing when the market goes down.
You enjoy most of the gains, but give up the gains above a cap in exchange for cutting out ALL the loses.
Avoid Stock Market Adjustments, Downturns & Crashes
As strong as the S&P 500 is, it is still subject to the stock market
roller-coaster volatility ride. Its fate rides with the market, and frequently, it loses money.
Mathematically speaking, the amount you give up above the cap is smaller than the amount you lose when the market goes down.
Let's compare performance over the last 25 years:
Looking Back Over the Last 25 Years
Although past performance is no guarantee of future results, a look back will help you understand the dynamics of each investing strategy.
If you had invested $100,000 into the S&P 500 (in red) and $100,000 in an S&P 500 Index Crediting account (in green) over the last 25 years, see how they would fair after typical fees.
Clearly the Index Crediting won with $648,185 over the S&P 500's $438,044, but how did Index Crediting earn the extra $210,141 while facing less risk? Through option contracts!
In the case of Index Crediting, your money is not in the market directly. If it was, when the market goes down, so does your account value. With Index Crediting, your money is in a seperate account that earns interest which is then used to purchase option contracts against the S&P 500. During periods when the market goes up, the option contract is exercised and you get the returns up to a cap. When the market goes down, the option is not exercised. This means that you get none of the losses, because your money was not actually in the market.
Mathematically speaking, getting the bulk (up to the cap) of the market returns while avoiding all market downturns outperforms the market as a whole. As it turns out, avoiding market losses is the best way to increase your average investment return while reducing your risk exposure.