In 2024, beating the S&P 500 was mathematically close to impossible.
Everyone says it, and it makes sense. But since I like numbers, I wanted to put some science behind it.
I ran 9 sets of simulations.
Each set = 10,000 random portfolios, built with 10 to 90 stocks, all equal-weighted.
The outcome was crystal clear:
Most random portfolios outperformed the S&P 500 Equal-Weighted Index (+12.8%).
But none came close to the cap-weighted S&P 500 (+25%), where the top 10 stocks — especially the Magnificent 7 — drove nearly all the gains.
The lesson is uncomfortable:
If you want to measure a manager’s true stock-picking ability, the right yardstick is the Equal-Weighted S&P 500.
Outperforming the float-weighted S&P 500 in 2024 wasn’t about skill - it was about how concentrated you were in a handful of mega-caps.
That’s not skill. That’s just portfolio construction roulette.
