Can I Beat The S&P 500?

Everybody wants to beat the odds.? Ask anybody who plays 21 either at a Vegas Casino or a Vegas online casino, they will all ask the same question, ?How can I beat the House?? How can I beat the odds?? When talking about putting money into the stock market, it is no different.

But what are the odds when talking about the stock market?

S&P 500

The S&P 500 is a list of 500 large companies that are publicly traded companies that are listed on the United States Stock Exchanges.  This index is considered to be the best indicator of the U.S. Stock Market. The average yearly return of the S&P 500 is 9.5%, but sometimes it has had a decline of 30%.  Overall, the S&P 500, 70% of the time, has posted annual increases.  

Although the index only lists companies listed in the United States, it includes many multi-national companies.   The S&P 500 is considered a large-cap index, and it covers 80% of the market capitalization.

Today, nearly all major brokerages and fund companies offer some type of S&P 500 fund.

S&P 100

The S&P 100 is a subset of the S&P 500 that consists of the top 100 largest and most stable companies in the S&P 500.

The index was started on June 15, 1983.  This index is considered larger-than-large-cap index, and it covers 63% of the market capitalization.

The average rate of return of the S&P 100 since its creation in 1983 is 8.88%.

S&P 400

The S&P 400 is a mid-cap index.  None of the companies that are on the S&P 400 are on the S&P 500.  The S&P 400 covers 7% of the market capitalization.  

The index was started in 2004 and has an average rate of return of 8.96%

S&P 600

The S&P 600 is a small-cap index, so none of the companies in the S&P 600 are in either the S&P 500 or the S&P 400.  The S&P 600 covers only 3 – 4% of the market capitalization.  

The index was started in 1994 and has an average rate of return of 10.63%.

S&P 1000

The S&P 1000 is a combination of the S&P 400 (mid-cap companies) and the S&P 600 (small-cap companies).  If it is calculated in proportion, the average rate of return for the S&P 1000 is 9.96%.

S&P 1500

The S&P 1500 is a combination of the S&P 500, the S&P 400, and the S&P 600.  If it is calculated in proportion, the average rate of return for the S&P 1500 is 9.92%.  

Wilshire 5000 Full Cap Total Market

The Wilshire 5000 Total Market Index is a market capitalization-weighted index of the market value of all US stocks actively traded in the United States.? As of June 30, 2018, the index only contained 3,483 individual companies. This index is intended to measure the performance of the most publicly traded companies headquartered in the United States. Penny Stocks and stocks of extremely small companies are not included.??

Of all of these indexes, the Wilshire 5000 has the highest rate of return.  The 5-year average return was 10.46% and the 10-year average rate of return was 12.91%.

Why does the Wilshire 5000 have a better rate of return than the S&P 1500?

The Wilshire 5000 takes out of its index extremely small companies or as they are sometimes called microbusinesses.  Microbusinesses are a sub-set of small businesses, but a microbusiness has less than 6 employees. While a small business can technically have dozens of employees and would still be considered a small business.

The other category of stocks that are kept out of the Wilshire 5000 index is penny stocks.   Penny stocks are stocks that trade for less than $5 per share initially. Penny stocks generally are quoted over-the-counter, hence the name OTC stocks.  Exchanges that list Penny stocks include the OTC bulletin board.  

Prosecutors and the Federal Bureau of Investigations say that fraud is widespread in the penny stock market.  Another problem with these penny stocks is that they can be easily manipulated by stock promoters (social media traffic) and pump and dump schemes.


Even though the S&P 600 has the highest rate of return, it is a bad financial decision to invest in only small-cap stocks.

A good investment plan needs to have a combination of large-cap stocks, mid-cap-stocks, and small-cap stocks.? The S&P 1500 index gives you that.

The Wilshire 5000 is also a well-diversified portfolio that covers the whole stock market, and they have done the work to take out the microbusinesses.