In 2023, the big gain in the US stock markets were driven by the outsized returns of seven giant companies.  The “Magnificent Seven”: Apple, Amazon, Alphabet (Google), Meta (Facebook), Microsoft, NVIDIA, and Tesla all experienced incredible returns! 

The performance of these name brand technology companies led some to question why an investor would bother holding anything else. Having individual positions in any of these, let alone all of them, guaranteed the investor would outperform the boring old index in 2023.

But a closer look reveals this magnificence was perhaps momentary. If we look at the performance of these stocks and an index fund of the largest US companies (S&P 500) year by year since 2021, we may have a different viewpoint.

NONE of them beat the S&P 500 every year. Three underperformed over these 3+ years, sometimes wildly (Tesla!). Four outperformed sometimes wildly (NVIDIA).

This is a great reminder of a few things:

1. The US is home to many great companies.

2. There are many different investment strategies that can generate good returns.

3. What works during one period may not work during another.

4. It is incredibly hard to predict what stocks will outperform the overall market.

At SoundView, our portfolios are heavily invested in a broad number of US companies. We are doubtful we can outguess the overall market, so we continue to invest in low-cost index funds.