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If Investing is About Meeting Goals, Not Winning Games, Why do Investors Keep Treating the S&P 500 Like an Opponent?
- Alpesh Patel
- 6 days ago
- 5 min read
Investing was never meant to be a contest. In theory, it is the most rational of pursuits: the efficient allocation of capital to meet future goals.
Yet modern investors behave less like allocators and more like athletes - obsessively checking whether they have beaten the S&P 500, as though personal retirement plans were a professional sport.
This article argues that investors treat the S&P 500 like an opponent because of the fusion of psychology, marketing, and media that has gamified investing.
Benchmarks, designed as neutral measuring tools, have become emotional yardsticks of self-worth. The result is an industry; and a culture where performance comparison eclipses purpose, and the scoreboard substitutes for the finish line.
1. The Purpose of Investing: Goals, Not Glory
At its core, investing is a goal-based activity. The purpose is to convert savings into future utility — a child’s education, a pension, or financial independence. In academic finance, the success metric is goal attainment probability, not relative return.
Harry Markowitz’s Modern Portfolio Theory (1952) envisioned investing as a balance between expected return and acceptable risk.
Nowhere did he suggest competing with an index. The idea of “beating” the market emerged later - not from theory, but from marketing: a way for fund managers to justify fees and for investors to measure progress through comparison.
The problem is that the S&P 500 is a benchmark of markets, not of lives. A retiree in London drawing income in sterling gains nothing from outperforming a dollar-based U.S. index if volatility destroys their peace of mind. Yet the cultural prestige of the S&P 500 - America’s scoreboard of capitalism - has redefined financial success as athletic victory.
2. The Psychology of Comparison
The need to compare is deeply human. Social comparison theory (Festinger, 1954) shows that people evaluate their own success relative to others when objective standards are unclear. In investing, where the future is uncertain and returns abstract, the S&P 500 becomes a convenient proxy for “how am I doing?”
Three behavioural biases fuel this obsession:
Relative deprivation: Investors who earn +8% feel dissatisfied if the S&P 500 gained +10%.
Overconfidence: People overestimate their ability to “win” against the market.
Loss aversion: Underperforming the benchmark feels like a personal failure — even if absolute wealth rises.
Thus, comparison hijacks cognition. Investing becomes a competition for emotional validation rather than financial sufficiency.
3. The Media and the Metrics Machine
The financial media has weaponised this psychology. Daily news feeds display market performance as a zero-sum narrative: Dow up, investors cheer; S&P down, panic ensues.Television crawlers, smartphone apps, and social media dashboards deliver a 24-hour score update on a game that should last decades.
Fund managers exploit this framing. The promise to “beat the S&P 500” is marketing shorthand for skill - even though, as the S&P SPIVA Scorecard (2024) shows, over 85% of active funds underperform it over ten years.
The illusion persists because it is emotionally satisfying: losing to an opponent feels temporary, losing to arithmetic feels existential.
The industry therefore sustains itself by gamifying investing — turning rational asset allocation into perpetual tournament play.
4. The Role of Identity and Ego
For many investors, especially professionals, the S&P 500 is not merely a benchmark; it is a mirror. Performance relative to the index signals intelligence, competence, and status.
This ego attachment explains the persistence of futile competition. As Meir Statman notes in Finance for Normal People (2017), investors seek not only utilitarian returns but also expressive benefits - pride, self-esteem, and belonging. To “beat” the market is to declare oneself exceptional.
By contrast, steady compounding through evidence-based strategies like those of the Great Investments Programme (GIP) offers no drama, no headlines, no glory. It satisfies the intellect but not the ego. In a culture addicted to narrative, humility rarely trends.
5. The Benchmark as a Social Construct
The S&P 500’s dominance is as much sociological as financial. It embodies the myth of American exceptionalism - capitalism’s self-image of progress and inevitability. To beat it is to triumph within the system; to merely match it feels mediocre.
Yet as John Kay observed, “the purpose of business is not to make profit, but to make profits necessary to sustain purpose.” The same applies to investing. The obsession with outperforming the index mistakes means for ends.
The GIP philosophy of compounding exposes this inversion. By focusing on absolute, risk-adjusted growth - Quality, Income, Sortino, and behavioural discipline - it redefines success as meeting one’s own goals, not outperforming someone else’s.
6. The Cost of Turning Investing into a Game
Treating the S&P 500 as an opponent is not harmless entertainment; it is financially self-destructive. The pursuit of relative outperformance leads to:
Excessive turnover: chasing quarterly leaders.
Timing errors: buying euphoria, selling despair.
Concentration risk: mimicking the index’s latest darlings.
Dalbar’s Quantitative Analysis of Investor Behaviour (2023) found that the average U.S. equity investor underperformed the S&P 500 by 1.7% per year, primarily due to emotional trading - the irony being that chasing the benchmark ensures one never catches it.
In contrast, the compounding investor who holds disciplined allocations and rebalances annually captures the market’s long-term return without the anxiety. The radical act is therefore not competition, but composure.
7. The Case for Purpose-Driven Investing
Goal-based frameworks such as the GIP restore investing’s moral geometry. They ask three questions:
What return do you need to meet your objective?
What volatility can you endure without abandoning the plan?
What evidence supports your allocation?
By shifting attention from beating the S&P 500 to meeting personal goals, they transform finance from a game of comparison into a science of sufficiency.
This approach is radical precisely because it is humble. It refuses the theatre of competition. It replaces the illusion of control with the discipline of patience - a virtue that markets reward but marketing ignores.
8. Counter-Argument: The Value of Benchmarks
A fair assessment concedes that benchmarks serve useful purposes:
They enable transparency and accountability.
They inform performance measurement.
They help investors detect underperforming managers.
However, the benchmark’s utility ends when it becomes a psychological master rather than an analytical servant. The S&P 500 should be a compass, not an adversary. The investor’s task is navigation, not victory.
Conclusion
Investing is not a contest to defeat the S&P 500; it is a process of aligning capital with purpose. Yet in a world saturated with data, social proof, and performance porn, comparison has eclipsed contentment.
The irony is that those who treat the S&P 500 as an opponent rarely beat it, while those who ignore it often do - simply by compounding patiently, avoiding panic, and letting mathematics work quietly in their favour.
The Great Investments Programme embodies that philosophy: that wealth is built in silence, not in scoreboards.
The real opponent was never the index; it was the investor’s own impatience.
References
S&P Dow Jones Indices (2024). SPIVA Europe Scorecard.
Dalbar (2023). Quantitative Analysis of Investor Behaviour.
Kahneman, D. & Tversky, A. (1979). Prospect Theory.
Markowitz, H. (1952). Portfolio Selection. Journal of Finance.
Statman, M. (2017). Finance for Normal People.
Kay, J. (2015). Other People’s Money.
⚠️ Disclaimer: Capital is at risk. Past performance is not indicative of future results. This article is for educational purposes only and does not constitute personal investment advice. Please do your own research and, if needed, consult a regulated financial adviser.
Alpesh Patel OBE
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