By Jason Zweig
Fellow investors,
A couple of weeks ago, I gave a talk to a class of M.B.A. students at Columbia Business School. Because it was so early in the new year, I thought it would be fun to do a quick poll about 2025. (After all, the class -- taught by Profs. Eric Johnson and Stephen Zeldes -- is Psychology and Economics of Consumer Finance!)
I asked three questions. You should answer them, too.
-- How often do you trade stocks, options or crypto? (At least once a day /
at least once a week / at least once a month / no more than a few times a
year)
-- If you are a frequent trader (i.e., if you trade more than a few times
per year), did your portfolio outperform the S&P 500 in 2025? (Yes / no)
-- If you just answered yes, what's your best estimate of your portfolio's
return in 2025?
For the final question, I supplied ranges of returns, from a loss of at least 10% to a gain of at least 30%.
A quarter of the class admitted to trading at least once a month; 5% traded at least once a week.
Among those who said they traded frequently, slightly over a quarter claimed their portfolio beat the market last year. Here are the returns they said they earned (along the vertical axis) and (on the horizontal axis) what percentage claimed to land within each range.
As you can see, about two-thirds of the group reported beating the market with returns ranging between a big loss and a maximum of 15%.
In 2025, the total return of the S&P 500 was 17.9%.
In other words, two-thirds of those who claimed to have beaten the market were, in fact, beaten by it.
This survey was a very small sample, but it's far from unusual.
In an experiment published in 1999, nearly one-third of investors claimed their funds had outperformed by at least 5 percentage points, and one of every six said they'd beaten the market by more than 10 percentage points. It turned out that nearly 90% of the people who claimed to have beaten the market had exaggerated their returns. One out of four self-described outperformers had trailed the S&P 500 by at least 15 percentage points.
In a survey I helped design around the same time, more than 500 investors looked back at their performance over the previous 12 months. Roughly a quarter said they had beaten the market. Among those people, 4% didn't know how much their investments were up -- but were sure they'd beaten the market anyway. Two-thirds claimed to have outperformed with returns between 13% and 28%.
In fact, over that 12-month period, the S&P 500 had gained 39.8%.
It's human nature to think we're above average. It might even be good for our mental health -- up to a point. But if you think you beat the market even though you lost money or don't have a clue what your return was, you're asking for trouble.
( Above: At a maple-sugaring camp in Maine during the Civil War, a well-dressed man boasts of his exploits. Is he bragging about his bravery on the battlefield? The money he made trading shares of the Boston and Maine Railroad? He seems to have an audience of one -- himself -- as the nearby women ignore him and a boy hollers out a message of his own.)
This is an edition of the Intelligent Investor newsletter, where Jason Zweig writes twice monthly about investment strategy and how to think about money. If you're not subscribed, sign up here.
A Talk with Mr. S&P 500
For nearly half-a-century, until he retired last month, Howard Silverblatt was the walking, talking encyclopedia of the S&P 500. I can't tell you how many times I called or emailed the senior index analyst at S&P Dow Jones Indices to resolve some arcane question no one else could answer. I couldn't resist doing an exit interview with him last week.
Here are some excerpts.
Q: What did people do with the S&P 500 in 1977?
A: They measured their portfolios against it. You didn't have that many instruments. No one was really going out and buying 500 companies. It's not till, you know, Vanguard and [other index funds], that you actually got [investing] instruments. When I came to S&P, the index group was three people, three people, three. We're now a four-digit number.
Q: Wasn't the first S&P 500 fund equally weighted [rather than by the market capitalization of each stock]?
A: Cap-weighting is a major hassle, even if you're not changing the shares all the time. I mean, [500 stocks was] a lot of members to get the prices [on], you know what I mean? Think of what systems were back then, you know, they were enormous and you couldn't get stuff. We used to get our pricing from IDC. The 216 tape, because it was 216 bytes, you know. We used a cab to deliver it from IDC. It was cheaper than a courier.
Q: Did anyone foresee how much index funds would grow?
A: I don't think anyone really realized the financial impact it would have -- not just on the markets but on S&P as a company. I mean, you know, S&P Indices makes their money by licensing the 500. So when you go and put money into Vanguard, for example, S&P gets zero-point-zero-zero-zero-zizzzzz of that money, a very very small piece of $10.6 trillion dollars. And that's a lot of money. And as of last week, I think we had, in all, about 2 million indices that we calculate nightly.
Q: Do you think Elon Musk's SpaceX can get index providers to bend their rules and admit it to market benchmarks like the S&P 500 major indexes right after its likely IPO later this year?
A: I would hope that the company [S&P] does not do that. When I left, I would have taken bets against it, okay? But what I do think they will and should do, they'll take commentary. They'll take a look at things, you know. They'll review it.... Could one person or an organization be strong enough to push them into doing it? I would say, I hope not.
Note: Silverblatt and I spoke after the market close on the day the Dow Jones Industrial Average crossed 50000 for the first time, and before I could finish saying hello, he told me that Caterpillar had contributed 47% of the year-to-date return of the Dow.
I'm going to miss him.
Catching Up
My latest column looks at low-volatility investing: stocks and funds whose prices fluctuate less sharply than the overall market. David Allison of Allison Investment Management emailed me with a good point: "Everyone was talking about low-vol stocks and strategies 10 years ago, but you don't hear much about them now."
In fact, almost exactly a decade ago I wrote that these funds were red-hot, sucking in billions of dollars from investors desperate to chase recent high performance.
Andrew Ang, then a managing director at BlackRock, told me in 2016 that "excessive crowding of any strategy should send up a flag of warning." He urged investors not to chase the hot returns these funds had recently racked up. "I don't think you should go into low vol to outperform the market," he told me. "You should go in to reduce your risk."
Back then, most people were buying these funds for the wrong reasons. They're worth a look now -- for the right reasons.
Money Mailbag
Have a question you'd like me to answer?
Want to weigh in on what you just read? Got a tip on something that I or my colleagues should investigate? Itching to tell me I'm wrong about something?
Just email intelligentinvestor@wsj.com and I'll see your note. Don't forget to include your name and city.
Be well and invest well,
Jason
Last Word
About The Intelligent Investor
In The Intelligent Investor, Jason Zweig writes about investment strategy and how to think about money. To send feedback, reply to this email or send a note to intelligentinvestor@wsj.com. Sign up to get an email alert every time Jason publishes a column. Got a tip for us? Here's how to submit.
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(END) Dow Jones Newswires
February 10, 2026 10:55 ET (15:55 GMT)
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