Does venture capital outperform the S&P 500?
VC Funds gave 48% higher returns than the S&P 500 on average over the sample period. VC investments were riskier (only outperforming the S&P 500 60% of the time), but on average better. There was a negative correlation between recent S&P 500 returns and future S&P 500 returns.
Half of all venture funds outperform the stock market, which is the benchmark most institutions measure VC funds against. Several articles and research papers have been published on the PME and the comparison of VC versus public stock performance.
As of Q2 2023, Linde plc (NYSE:LIN) shares were held by 70 of the 910 hedge funds tracked by Insider Monkey, valued at $4.6 billion. This makes Linde plc (NYSE:LIN) the most commonly owned stock by hedge funds on our list of 13 stocks that outperform the S&P 500 every year for the last 5 years.
The highest performing fund in the list was the $116m PGIM Jennison US Growth fund, managed by Blair Boyer, Natasha Kuhlkin and Kathleen McCarragher. The strategy was up 53.47% in 2023, after a 39.83% loss in 2022.
Berkshire has a history of outperforming the S&P 500 during recessions, and performing especially well during bear markets, according to data from Bespoke Investment Group. Since 1980, Berkshire shares have beat the broader market over the course of six recessions by a median of 4.41 percentage points.
Ranked: S&P 500 Sectors by 2023 Return
Information Technology, Communication Services, and Consumer Discretionary were the three biggest winners in 2023, all of them up more than 40% for the year.
They expect a return of between 25% and 35% per year over the lifetime of the investment. Because these investments represent such a tiny part of the institutional investors' portfolios, venture capitalists have a lot of latitude.
Successful startup founders have the highest success rates on their VC investments, nearly 30 percent. They are followed by professional VCs at just over 23 percent, and unsuccessful founder-VCs at just over 19 percent.
Venture Funding Dried Up Even More in October -- and It's Not Expected to Rebound Soon | Inc.com.
- High-yield savings accounts.
- Certificates of deposit (CDs) and share certificates.
- Money market accounts.
- Treasury securities.
- Series I bonds.
- Municipal bonds.
- Corporate bonds.
- Money market funds.
What stocks beat the S&P 500 over 5 years?
| Company | Sector | 5 Year Total Return |
|---|---|---|
| Cadence Design Systems (CDNS) | 🖥️ Information Technology | 507% |
| KLA Corp (KLAC) | 🖥️ Information Technology | 498% |
| Synopsys (SNPS) | 🖥️ Information Technology | 491% |
| Advanced Micro Devices (AMD) | 🖥️ Information Technology | 469% |
The historical average yearly return of the S&P 500 is 9.69% over the last 20 years, as of the end of December 2023. This assumes dividends are reinvested. Adjusted for inflation, the 20-year average stock market return (including dividends) is 6.91%.
Less than 10% of active large-cap fund managers have outperformed the S&P 500 over the last 15 years. The biggest drag on investment returns is unavoidable, but you can minimize it if you're smart. Here's what to look for when choosing a simple investment that can beat the Wall Street pros.
However, if you need comprehensive financial advice and guidance, a financial advisor could be worth the additional cost. In many cases, it's not a matter of choosing between the S&P 500 and a financial advisor, as a financial advisor may recommend investing in the S&P 500 as part of a broader investment strategy.
The greater a portfolio's exposure to the S&P 500 index, the more the ups and downs of that index will affect its balance. That is why experts generally recommend a 60/40 split between stocks and bonds. That may be extended to 70/30 or even 80/20 if an investor's time horizon allows for more risk.
Instead, he has consistently told investors to buy an S&P 500 index fund. "I recommend the S&P 500 index fund, and have for a long, long time to people. And I've never recommended Berkshire to anybody," Buffett said at Berkshire's annual shareholder meeting in 2021.
Ten Year Stock Price Total Return for Berkshire Hathaway is calculated as follows: Last Close Price [ 610,086 ] / Adj Prior Close Price [ 172,425 ] (-) 1 (=) Total Return [ 253.8% ] Prior price dividend adjustment factor is 1.00.
The shares are up an annualized 12% in the last 10 years, slightly behind the 12.2% yearly total return, including dividends, for the index. Berkshire also is behind the S&P 500 over the past five years with a 13.4% annualized return, compared with 16.4% for the index., according to Bloomberg calculations.
- ChargePoint.
- SunPower.
- SolarEdge Technologies.
- Lumen Technologies LUMN.
- Plug Power.
- Microsoft (NASDAQ: MSFT)
- Apple (NASDAQ: AAPL)
- Nvidia (NASDAQ: NVDA)
- Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG)
- Amazon (NASDAQ: AMZN)
- Meta Platforms (NASDAQ: META)
- Tesla (NASDAQ: TSLA)
Which sectors will do well in 2024?
Sectors delivering strong earnings would continue to remain attractive. We remain overweight on financials, discretionary consumption, industrials, real estate, auto and healthcare. Domestic cyclicals plus manufacturing and capex/industrial themes should continue to do well in 2024, in our view.
Thus, the 80-20 rule can help managers and business owners focus 80% of their time on the 20% of the business yielding the greatest results. In investing, the 80-20 rule generally holds that 20% of the holdings in a portfolio are responsible for 80% of the portfolio's growth.
VCs often use the shorthand phrase "two and twenty" to refer to the 2% of annual management fees a venture fund might take and the 20% carried interest (or "performance fee") it would charge.
100/10/1 Rule - Investor screens 100 projects, finance 10 of them, and be lucky & able to enough to find the 1 successful one. Sudden Death Risk - Where the founder stops/loses capability to work on the idea. Investors usually choose the incubator strategy to avoid this risk.
Approximately 30% of startups with venture backing end up failing. Around 75% of all fintech startups crash within two decades. Startups in the technology industry have the highest failure rate in the United States.
