Billionaires underperform the S&P 500
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If you want to outperform the average billionaire, you might try just sticking all your money into an S&P 500 index fund.
Why it matters: While it's true that the ultra-rich have been been getting richer in recent years, even they haven't been able to keep up with the torrid pace set by the U.S. stock market.
- There are exceptions, of course, particularly of late for those with warm ties to Donald Trump. Elon Musk and Peter Thiel, for example, have had a very good year, and Trump's Cabinet will feature plenty of their ultra-rich compatriots.
Between the lines: Though billionaires have effectively unlimited access to the world's top investors and financial strategies, almost nothing can keep up with the sheer power of U.S. stocks when they're on a bull run.
- That's worth keeping in mind when financial services companies try to sell you access to investments that have historically been available only to the ultra-rich.
The big picture: Billionaires face two disadvantages compared to the S&P 500.
- One is that they're global, so they tend to be exposed to global markets, which have generally underperformed U.S. stocks.
- The second is that they tend to be concentrated in their own family companies. Even in America, two out of three S&P 500 companies are underperforming the index as a whole. (Thanks, Nvidia.)
The other side: Billionaires do, however, have the advantage that there are more of them than ever.
- This year's total billionaire wealth of $14 trillion can be attributed to 2,682 billionaires, up more than 50% from 2015, according to a new report from UBS.
- Meanwhile, the number of companies in the S&P 500 is always very close to 500.
By the numbers: The wealth of the average billionaire rose 45% over the nine years between 2015 and 2024, from $3.6 billion to $5.2 billion, per UBS.
- That's a rise of just 8% in real terms, or less than 1% per year.
The bottom line: When you're already dynastically wealthy, you often focus more on preserving your wealth than you do on growing it.
- Those of us saving for retirement, by contrast, generally have a much greater need for our savings to grow.
