22 Jul 21st July 2025
Index Movement Last Week
| S&P500 | +0.6% |
| Nasdaq | +1.3% |
| Aussie ASX200 | +2.1% |
I’m not going to talk much about the markets this week as very little has changed and we just just started earnings season so will have something more interesting to talk about next week.
Instead I want to talk about long term investing.
What this chart says is, using the S&P500 index data, a one month hold produced profits 62.7% of the time. Take that to one year and it goes up to 75.0% of the time. Two years is 83.0% of the time. Six years plus gives us profits over 93% of the time and once we get to 16 years then the index has been profitable 100% of the time.
Buying and selling stocks, with short holding periods, makes things very hard. It’s not on the chart but a one-day holding period results in profits 51% of the time.
Conclusion – If you want more winning trades then simply hold things for longer.
But this is only really true for the index.
Here are the 10 biggest market-cap stocks in 2000 and their performance in the decade leading up to the year 2000 compared to their performance in the decade that followed.
Only Walmart and Microsoft managed to beat the index post 2000. All the rest underperformed the index.
Note Cisco. 85,000% return in the 10 years leading up to 2000 but only 29% in the decade that followed.
What can we learn from this?
The best performers do not stay as best performers forever. The stocks who have led the way for the last 10 years, rarely continue to go on leading.
Applying this idea to today……..
Nvidia has done exceedingly well. It is now the most valuable publically traded stock in the world with a market cap of over $4trillion. That is about the same as Amazon and Meta combined. It carries a 7.9 percent weighting in the S&P500 which is more than the entire sectors of Energy (3.0 percent), Real Estate (2.0pct) and Materials (1.9pct) combined.
But history has shown us these leaders are not the leaders of tomorrow.
Identifying the biggest future stock winners is impossible. So is predicting whether NVidia is going to continue to perform for the next 10 years.
But, the good news is, there is a way that you don’t have to and can make sure you benefit from whatever becomes the largest stock over the next ten years.
Go back and look at the list of 10 biggest stocks in 2000.
Now look at the 10 biggest stocks in 2025.
Different yeah?
This is the beauty of index investing. You buy the index in 2000 and your big exposure comes from the first list of stocks. Then, over time, without you doing a thing the index changes and by 2025 you have a different set main exposures.
The best bit is the change skews towards what is working best.
As you can see NVidia was not in the list in 2000. But over that period it produced a massive performance and became top of the list. You would have benefitted from NVidia’s performance just by holding the index over that time because it became a bigger and bigger portion of the index.
If you go out and buy the index today……then the single biggest impact (at the moment) to that index performance is Nvidia. If Nvidia conitinues to outperform, great, you will benefit. If it doesn’t then it will slip down the list (just like those stocks from 2000 have) and be replaced by the new latest and greatest performer, in the same way that Nvidia came up and replaced the leaders from 2000.
You can go out and try and pick individual winners and create your own little portfolio of best picks. Or you can just buy the index and let the index do the work for you.
If you like a broad based index then buy SPY
If you prefer more tech exposure buy QQQ. (that’s the one I hold)
Warning
Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.