Companies which offer the highest investment returns not only make profits but also revolutionize the sector they operate in. To give an example, Amazon has disrupted the retail industry. It has grown so much now that it has taken control over Whole Foods, an important physical retail market player in the United States. Not surprisingly, news of this takeover resulted in Whole Foods and Amazon shares going north. Share prices of their competitors went down.
Similarly, the electric car success of Tesla has pushed the traditional car manufacturer Volvo to announce that they will stop the production of internal combustion engine cars. The company will go the electric way. For an investor, it helps that the stocks of four companies- Google, Facebook, Netflix, and Amazon- should be in the portfolio.
Buying the index
Jack Bogle of Vanguard Investment Fund has been long saying that the best decision by any investor is to snap up the Standard & Poor 500 Index. The rest of the stocks hold little value and minimal interest. Such a position has been endorsed by Warren Buffett himself. Vanguard invests its money through its own global equity fund, named Vanguard US Opportunities Fund. This fund has surpassed the S&P 500 Index dependent funds from the time it came into existence. It is clear that Vanguard funds are extremely well-managed ones.
Vanguard did exceedingly well not only against the index but also against the peer funds. It can be easily be termed the best fund operating in the globe. The Vanguard fund manages about $2.4 billion. It has returned approximately 15.5 percent per year. In contrast, the S&P 500 Index returned only 8.2 percent over the same period. When it came to 10 years, the return was 11.77 percent. Returns from S&P was 6.32 percent during the same period. When it came to five years, Vanguard gave back 21.5 percent compared to 14.5 percent. For three years, it was 15.12 percent and nine percent. When it came to the one-year period, Vanguard gave 28.8 percent and the S&P 17 percent.
Before money gets invested, the fund managers analyze the companies' future earnings potential. They try to understand whether it is already being reflected in share price. A majority of such investment grade companies are in the United States, but quite a few companies are from Canada, Europe, and China. The emerging markets also have a few notable companies.