As long term investors, we always use S&P 500 as a benchmark together with other major indices like the UK100, GER30, and France 40 to grow our portfolio. Beating their performances could also mean beating the market.
The S&P 500 reached its all-time-high in February this year. Similarly, our global portfolio also achieved its all-time-high at the same time. When Covid19 started, most of the major indices around the world were severely hit. Our portfolio suffered the same effect.
Despite the pandemic, we managed to outperform most of the major indices in the last six months including S&P 500, UK100, GER30, France 40, Euro Stoxx 50, FTSE China A 50, and Hang Seng 50 index. In this article, I am sharing how we did that.
How We Beat S&P 500 and Other Top Indices During Covid19?
1. By Sticking with Our Stock Picks
While many traders cut their losses and closed their trades, we kept our holdings while earning some dividends. Most of our stocks belong to prominent brands in the US, UK, Germany, France, and Switzerland. We choose premium stocks that have positive momentum and high trade volume, and we are always confident about their potentials.
2. Buying Some Airline Stocks
Although Warren Buffett sold all their airline stocks, we did the opposite. We like Warren Buffett, the man is a legend. We’re fans of Warren here, but he has his reasons why he sold all their airline shares, and we respect that. But we are younger investors, and we feel like we have nothing much to lose.
3. By Diversifying Enough
Diversify but not too much. Diversification always works, and it helps in minimizing risks. As an investor, I always allocate my funds to different stocks in different industries. The travel sector is badly hit by the pandemic, but tech stocks recovered faster while people stayed and worked from home.
4. Swing Trading
In every crisis, there is an opportunity. Covid19 has caused much volatility in the market. Prices would swing every other day. There were times when some of the stocks from our watchlist fell more than 5% then recovered around 8% the next day. We carefully took some chances and closed some profitable trades.
Why Do We Benchmark Stock Market Index?
Investors benchmark stock market indices to copy and beat their performance. If you check out their historical charts, most indices are on a growing trend because they are designed that way. If you want to grow your capital the same way or if you want to outdo an index, track their performance.
Companies listed in a stock market index have strict requirements before they can be added on the list. They usually have large market cap, outstanding earnings, and excellent fundamentals. Aside from that, they must meet specific standards to maintain their ranks.
Get to Know the Top Indices in the World:
- Top 50 Companies in the S&P 500
- Nasdaq 100 Components in 2020
- Down Jones 30 Companies
- Top Companies in the GER30 Index
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