The weekly digest — 11.12.24

A Winning Machine

What is more powerful than a 101-year-old winning machine? Since 1923, the S&P500 index has generated an annualised return of ~10.5%. For more than a century, it has:

• Beaten 99.9% of professional investors, who typically underperform the index annually by ~2-3%, with the gap widening dismally over time.

• Proven its stellar compounding potential; $1 invested in the index in 1923 would be worth more than $13,000 today.

• Comprised of the bluest of the world’s blue-chip stocks, self-regulating and re-weighting these in line with their individual performances — eliminating user selection error.

• Always regained its previous highs, surviving the Great Depression, one World War and the Covid pandemic.

Weekly Digest

On a look-through basis, we will become entitled to our dividend from Walmart this week. Would you believe an astounding 250-million-plus shoppers visit a Walmart each week, resulting in more than $650 billion in annual sales? Founder Sam Walton could not have foreseen a future of this scale when, in 1949, he was forced to close shop in Newport after his landlord refused a lease renewal. Instead, he relocated to Bentonville, where he opened Walton’s 5 & 10 (“five and dime”) in 1950. Early on, Walton recognised that if he had buying power, he could differentiate his business with lower prices, but he lacked capital. So, he risked overbuying in a few concentrated staples (toothpaste; soap), which he placed at the front of the store and sold at near-giveaway prices. The rapid sell-through armed Walton with supplier credibility, enabling him to extend the strategy to more lines while, simultaneously, the heavily discounted items lured more shoppers. So began the virtuous cycle: the introduction of more product lines, followed by more stores, initially located in small towns such that traditional five and dimes could not compete. Cut to 1970: with a growing core of stores and a name change, Walmart went public and paid its maiden dividend in 1974 — which it has increased annually for 51 consecutive years, driving an enormously successful stock performance in parallel.

To Have and To Hold

The greatest threat to our investment success? Us. So, how do we get ourselves from outset to outcome? Over four years, we’ve collected more than four million data points that demonstrate how a particular methodological communication keeps investors on track. This email is part of a powerful anticipatory feedback loop that works as a bad-decision buffer. With our handholding, evidence shows investors are far more likely to hold onto their investments — long enough to enjoy their wins.