Advisory FAQ: Why Beating the Market Isn’t the Most Important Thing

Christian Ray, CFP® CPWA®, QA’s Director of Client Engagement, shares his thoughts on why beating the stock market isn’t the most important thing.

Christian, what exactly is the “market” and why isn’t it simply the S&P 500?


For many, the “market” can often be over-simplified into the performance of a familiar stock market index that scrolls across our screens daily (think the S&P 500 Index, Dow Jones Industrial Average, etc.) But the market is so much broader than the aggregate performance of the 500 stocks in the S&P 500.  For example, today nearly 6,000 companies trade on the NYSE and Nasdaq, the two largest US exchanges, with another 10,000+ companies trading on the OTC or over the counter markets [1]. Oh, and we haven’t even made note of international equity markets or other markets, including fixed income or the newer digital asset markets.  Related to the world of investing, we often focus on recognizable names and markets to help us provide context to what’s going on more broadly in the financial markets.

But while these indices may carry some direct correlation to the money we have invested, we should recognize that investment opportunities can be found in many markets and often exist outside an index of recognizable large company names. So, understanding how to frame the “market” into something more personally relevant can be a challenge, but to simply measure your own success by a headline index is not necessarily the best approach … especially considering most prudent investors wouldn’t intentionally allocate 100% of their portfolio into a single market index due to the risk of doing so.

So, tell us why beating the market is hard and why it may be the wrong target?


I recently read an article published by Morningstar[2] which dove into the US stock market over the last decade (beginning in January 2011 and concluding in December 2020).  The punchline effectively concluded that while the US stock market enjoyed a 13.90% annualized gain for a decade … only 42% of those companies even generated positive investment returns! Nearly 36% posted negative investment returns while the bottom 22% vanished altogether (either acquired or delisted). So, while benchmarking can be helpful in some ways for individuals, it’s important to recognize that beating the market isn’t easy to do and that the benchmarks that really matter involve setting and meeting your own personal goals.

What is more important than beating the market?


Meeting your goals! Effective overall financial planning and proper portfolio construction are the key variables to meeting them.  Framing what is important in terms of the wealth needed to meet your needs and wants, and then saving and investing according to a plan that allows room for error to happen, such as an interruption of your plans or above average market volatility.  With your personal goals in mind, an investor can start to “back into” a path to follow with their investments guided by their objectives.  Invest based on your specific goals and timelines.  Sometimes investing conservatively doesn’t fit our personal “profile,” but it is important to recognize your time horizon and the tradeoff of where the potential for loss of investment may outweigh the potential gain of staying aggressively invested.  For example, you wouldn’t take your hard-earned savings for a down payment on your dream home and bet it all on a single meme stock … right?

Lastly, can you provide a framework as a closing thought?


Discipline, diversification, and diligence.

Discipline is the “doing the hard thing”. Saving when you don’t want to, sticking to your budget and rebalancing portfolios when you would prefer to take greater risk than planned to let your winners keep running.

Diversification means not all your eggs in one basket. So, owning different assets, areas of the markets, styles, companies, etc., helps us to not only smooth out some of the inevitable bumpiness of the markets but also help us not miss out on areas of the markets we would typically overlook simply because of our biases.

Diligence is the ongoing actions needed to manage. If we set and forget … we often forget. Portfolios are like a garden, sometimes we must get dirty and pull the weeds out to see the flowers … and after looking at the flowers, maybe we realize we’re more of a “hosta” person and that our goals have changed.

Meet with your advisor or contact us today to talk further about your important investment planning.


[1] Exchange information.  NYSE:; NASDAQ:;

[2] Rekenthaler, John.  How Many Stocks Beat the Indexes?  Morningstar, April 26, 2021.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design) and CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Investments & Wealth Institute® (the Institute) is the owner of the certification marks “CPWA,” and “Certified Private Wealth Advisor.” Use of CPWA, and/or Certified Private Wealth Advisor signifies that the user has successfully completed the Institute’s initial and ongoing credentialing requirements for wealth advisors.

The index performance results referenced in this post represent past performance and are not a guarantee of future performance. Investment returns and principal value will fluctuate and are subject to market volatility, so that a client’s investment, when sold, may be worth more or less than the original cost. Indices are unmanaged and investors cannot invest directly in an index. An index’s performance does not reflect the deduction of transaction costs, management fees, or other costs which would reduce returns

The S&P 500 Index is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the New York Stock Exchange or the NASDAQ Stock Market.

The Dow Jones Industrial Average is a price-weighted measurement stock market index of 30 prominent companies listed on stock exchanges in the United States.

For more information regarding these indexes, please refer to the sponsor website at