Don’t Own These 10 Stocks? Then You’re Probably Underperforming the Market

The S&P 500 is up 25% so far this year. That's after a 16% 2020 gain despite the COVID-19 pandemic. Gains this high are not normal, as the market tends to average around 8% a year over the long term.

What's even more remarkable is that the 10 largest components of the S&P 500 are up — wait for it — an average of 50% year to date.

Now if you're looking at your portfolio wondering why it's underperforming the market this year, you aren't alone. Beating the stock market in 2021 is nearly impossible without these 10 stocks. Here's why.

Image source: Getty Images.

Flexing their muscles

The math here is beautifully simple. The 10 largest holdings of the S&P 500 make up 29% of the index. As mentioned, they are collectively up an average of 50% of the year, which contributes a gain of 13 percentage points to the S&P 500's return. That's around half of the index's gain from these 10 stocks alone. So, without their contribution, the index is up a whole lot less.


S&P 500 Weight

YTD Gain

Effect On S&P 500 YTD Return

Microsoft (NASDAQ: MSFT)



3.47 percentage points




1.30 percentage points




0.52 percentage points




1.58 percentage points




1.36 percentage points

Meta Platforms (NASDAQ: FB)



0.53 percentage points




3.03 percentage points

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B)



0.27 percentage points

JPMorgan Chase (NYSE: JPM)



0.33 percentage points

Home Depot (NYSE: HD)



0.58 percentage points

Data sources: Yahoo! Finance, YCharts, Slickcharts

Dissecting the S&P 500

We talk about the S&P 500 all the time, but we don't always discuss what makes up the index and why it moves the way it does. It may surprise you to learn that technology stocks actually make up over a quarter of the whole index, and that's dominated by big companies like Apple and Microsoft. Similarly, the energy sector, which is actually the best-performing sector of 2021 (even better than tech) only makes up 3% of the index. So, the energy sector could double and it would contribute less than Microsoft stock's 3.47 percentage point contribution so far this year.

MSFT data by YCharts

What to do about it

One of the biggest mistakes we can make as investors is obsessing over short- to mid-term performance. Zooming in to a particular quarter undermines the big picture. For example, there are plenty of stocks that absolutely crushed the market in 2020 that are underperforming or even down big this year (think Zoom, PayPal, Square, Teladoc, and Peloton, to name a few).

While it's easy to say that those companies are underperformers this year, keep in mind they are still net winners over the last two years.

A note of reassurance

Let's say that for a few years now, you've been underperforming the market because you haven't held the stocks that have really driven the index's returns. The truth of the matter is that you're still probably a lot better off because you were in the market in the first place. So if you're up, let's say, half of what the index is, you're still growing your wealth at a much quicker pace than folks who aren't in the market at all.

The most important priority is your financial goals. If you're investing in dividend stocks to supplement income in retirement, then you're playing a different game than growth-oriented investors. Similarly, if you're a value investor who focuses on stodgy, slow-growing, but safe companies that let you sleep at night, then it's simply expected that you're going to underperform a growth-driven market.

Focus on what really matters

The point here is that comparing your performance to the S&P 500, for better or for worse, is usually unhelpful. As long as you're investing in companies, cryptos, or other securities that you understand and that are helping you reach your goals, then the rest is little more than bragging rights.

The market moves in cycles. And while we may be living in a multi-year period of growth (especially mega-cap tech growth), there could be a few years where it shifts from growth to value, or from large-cap tech growth to small-cap growth. Hopefully, you're left with a better understanding of what's really driving the S&P 500 and why it's so easy to underperform if you didn't own stocks like Microsoft, Nvidia, or Tesla this year.

10 stocks we like better than Tesla
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

They just revealed what they believe are the ten best stocks for investors to buy right now… and Tesla wasn't one of them! That's right — they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of November 10, 2021

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Daniel Foelber has the following options: long December 2021 $210 calls on PayPal Holdings, long January 2022 $210 calls on PayPal Holdings, long January 2024 $100 calls on Teladoc Health, long January 2024 $200 calls on PayPal Holdings, long January 2024 $45 calls on Peloton Interactive, long September 2022 $210 calls on PayPal Holdings, short December 2021 $220 calls on PayPal Holdings, short January 2022 $220 calls on PayPal Holdings, short January 2024 $110 calls on Teladoc Health, short January 2024 $210 calls on PayPal Holdings, and short January 2024 $50 calls on Peloton Interactive. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Berkshire Hathaway (B shares), Home Depot, Meta Platforms, Inc., Microsoft, Nvidia, PayPal Holdings, Peloton Interactive, Square, Teladoc Health, and Tesla. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2022 $75 calls on PayPal Holdings, long January 2023 $200 calls on Berkshire Hathaway (B shares), long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, short January 2023 $200 puts on Berkshire Hathaway (B shares), short January 2023 $265 calls on Berkshire Hathaway (B shares), and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Leave a Reply

Your email address will not be published. Required fields are marked *