Summary

Consistently outperforming the S&P 500 over the long term is no easy feat, but over the past decade or more, a few technology, semiconductor, growth-oriented funds, and factor strategies have achieved significant excess returns. Community opinions suggest that the proportion of actively managed funds that consistently outperform the S&P 500 over the long term is very low. The strategies that can truly navigate cycles and achieve long-term compounding tend to focus on technology growth, semiconductors, high-quality leaders, and momentum. Compared with chasing short-term high returns, continuously capturing high-growth industries and achieving compounding through long-term holding may be the key to gaining long-term excess returns.

KTX Crypto Portfolio Observation

For the KTX Crypto portfolio, what is more worth noting in this community viewpoint is **"where long-term excess returns come from"**, rather than simply copying a particular fund or ETF:

• **Technology and semiconductors remain the core sources of excess returns:** Over the past decade or more, U.S. stock performance has been highly concentrated in technology giants, with semiconductors, information technology, and related sectors significantly outperforming the broader market over the long term.
• **Growth style has strong long-term resilience:** Large growth stock funds achieve higher excess returns by concentrating allocations in high-growth companies, benefiting from technology bull market cycles.
• **Concentrated allocations and factor strategies deserve attention:** By reallocating assets based on market capitalization, momentum, growth, and other factors, there is an opportunity to capture a small number of strong assets that contribute the majority of market returns.
• **Short-term high returns do not equal long-term excellence:** Doubling or even increasing tenfold in one year is not uncommon, but assets that can sustain high compound growth over ten years are extremely rare. Long-term compounding ability is more important than short-term bursts.
• In portfolio execution, "long-term trends + high-growth sectors + compounding ability" can serve as an observation framework, while being cautious of risks from single-industry concentration, overvaluation, and market style shifts.

Original Text Included

Which funds managed by the world's top financial talents can consistently outperform the S&P 500 over the long term?

Community authors, through long-term data observation, believe that from a long-term perspective, it is very difficult for actively managed funds to continuously outperform the S&P 500. When the time horizon extends beyond 15 years, the vast majority of actively managed funds struggle to maintain excess returns.

However, if the time frame is extended to 10–20 years, under specific investment strategies, industry themes, and excellent fund managers, there are still a few cases of long-term outperformance of the S&P 500.

The author roughly categorizes these long-term well-performing funds and ETFs into four types.

1. Technology and Semiconductor Industry

Over the past decade or more, returns in the U.S. stock market have been highly concentrated in technology giants, so technology and semiconductor-related funds have achieved significant long-term excess returns.

For example, SMH mainly focuses on the semiconductor industry chain; VGT primarily covers the U.S. information technology sector. Community opinions hold that these products have benefited from the continuous expansion of the technology industry over the past decade or more, and their long-term performance has clearly surpassed the S&P 500.

2. Large Growth Funds

The S&P 500 is a market-cap weighted broad-based index, including both value and growth stocks.

Large growth funds and index products focus more on technology, consumer, and innovative leading companies. During periods of low interest rates and rapid development of the technology industry, the growth style has gained higher return elasticity.

For example, QQQ tracks the Nasdaq 100 Index, concentrating on large technology and innovative companies; VUG mainly tracks large U.S. growth stocks.

Additionally, some actively managed growth funds that have long held large technology companies such as Microsoft, Amazon, and Nvidia have also achieved good long-term performance.

3. Classic Active Funds

The third category consists of actively managed funds that persist with specific investment frameworks over the long term.

Community opinions mention that some fund managers have achieved sustained excess returns through screening high-quality companies, concentrated holdings, and long-term holding.

For example, the investment philosophy represented by British investor Terry Smith emphasizes buying quality companies, controlling valuation, and holding long term; some established growth funds have achieved higher long-term returns by concentrating allocations in a few high-growth companies.

4. Factor and Dynamic Allocation ETFs

Besides traditional sectors and active management strategies, some factor ETFs that reallocate S&P 500 constituent stocks may also achieve long-term excess returns.

For example, XLG mainly selects the largest companies in the S&P 500; SPMO uses momentum factors, favoring stocks with strong recent performance.

The logic behind this is: long-term market returns are often not evenly distributed among all stocks but are driven by a small number of high-growth, high-performing companies.

The author ultimately believes one of the core reasons for outperformance of the S&P 500 over the past decade or more is that these strategies have largely captured the long-term growth trend of the technology industry.

Even when the market faces macro pressures such as high inflation, the technology industry still demonstrates strong long-term growth capability through productivity improvements, technological innovation, and business model upgrades.

Compared to chasing "tenfold growth in one year" short-term opportunities, what may truly matter is the compounding ability over a ten-year horizon.

Assets that grow tenfold in one year are not uncommon, but those that can sustain tenfold growth over ten years are extremely rare. What truly determines long-term wealth growth is not a single high return but the ability to continuously find high-growth assets and reinvest returns into the next growth cycle.

From a longer-term perspective, human societal development essentially relies on continuous technological innovation, efficiency improvements, and productivity advances to achieve growth. Therefore, long-term allocation in the technology industry is essentially a bet on the ongoing trend of productivity enhancement.

The ultimate question worth considering may not be "who is growing the fastest now," but rather: who can do the same thing better at a lower cost.

Original Author: Professor Zhouqi

X Account: @Zhouqi2013

Original link: https://x.com/Zhouqi2013/status/2085247111436943399 

Risk Warning: This article is a collection of community opinions and does not constitute any investment advice. DYOR (Do Your Own Research).