cnbc.com
Four ETFs Outperform S&P 500 Over Five Years
CNBC Pro identified four ETFs that outperformed the S&P 500 from 2020-2024, employing diverse strategies like focusing on small-cap industrials, research-enhanced indexing, and tracking broader indices, achieving returns exceeding 97% compared to the S&P 500's 97% gain over this period.
- What specific strategies did the four ETFs that outperformed the S&P 500 employ, and what were their resulting returns compared to the benchmark?
- Four ETFs—First Trust RBA American Industrial Renaissance ETF, JPMorgan U.S. Research Enhanced Index Equity ETF, Goldman Sachs Activebeta US Large Cap Equity ETF, and SPDR Portfolio S&P 1500 Composite Stock Market ETF—outperformed the S&P 500 over the past five years, achieving significantly higher returns. This success is notable considering the S&P 500's strong performance, with back-to-back gains exceeding 23% in 2023 and 2024.
- How did the market conditions of 2023 and 2024 (consecutive years of substantial S&P 500 gains) affect the overall performance of these four outperforming ETFs?
- These ETFs employed diverse strategies to surpass the S&P 500. The First Trust ETF focused on small and mid-cap U.S. industrial and banking companies. The JPMorgan ETF used a 'research enhanced indexing' approach combining index investing with active management, making small bets rather than large ones. Goldman Sachs' ETF tracked stocks with value, momentum, quality, and low volatility, while SPDR's ETF tracked a broader index, encompassing the S&P 500, S&P 400, and S&P 600.
- What are the broader market implications and potential future trends suggested by the outperformance of these ETFs, particularly considering the approaches they employed?
- The success of these ETFs highlights the potential for outperformance through strategic diversification and active management, even amidst robust market growth. This suggests investors might consider diversifying their portfolios to include these investment strategies to enhance returns and potentially mitigate risk. The sustained success of these funds also points toward broader shifts within market sectors and investor preferences.
Cognitive Concepts
Framing Bias
The article's framing emphasizes the success stories of ETFs that outperformed the S&P 500, potentially creating a positive bias towards actively managed funds and specific investment strategies. By highlighting these successes prominently, the article may downplay the general difficulty in consistently outperforming a market benchmark like the S&P 500. The headline and introduction focus on the impressive returns, creating a strong initial impression that may not be fully representative of the wider investment landscape.
Language Bias
The language used is largely neutral and factual, reporting the performance figures without overt emotional or subjective language. However, the repeated emphasis on the "best-performing" funds and phrases like "beat the benchmark" create a subtly positive tone that could influence readers' perception. While not overtly biased, the wording subtly favors active management strategies over passive ones.
Bias by Omission
The article focuses heavily on the top-performing ETFs, but omits discussion of the overall performance distribution of the 10,600+ ETFs screened. This omission prevents a complete understanding of the broader market trends and the rarity of such consistent outperformance. The lack of information on the average performance of the screened ETFs might mislead readers into believing that outperforming the S&P 500 is more common than it actually is. It also omits discussion of the risk profiles of the outperforming ETFs, which is crucial for investors.
False Dichotomy
The article presents a false dichotomy by implicitly suggesting that only these four ETFs provide viable alternatives to the S&P 500. The vast number of other ETFs screened and their performance data is omitted, creating an oversimplified view of the investment landscape. This limits readers' understanding of other investment options and strategies that may exist.
Sustainable Development Goals
The article highlights ETFs that have outperformed the S&P 500, indicating strong economic growth and potentially positive impacts on employment and investment within the related sectors (industrial, community banking, etc.). The success of these ETFs suggests a healthy investment climate and potentially increased capital available for economic activities.