Please ensure Javascript is enabled for purposes of website accessibility

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

By Daniel Foelber – Dec 1, 2021 at 8:32AM

Key Points

  • Large-cap companies are contributing the bulk of market gains this year.
  • It’s easy to underperform the market without a few key stocks.
  • Instead of worrying about outperformance, it’s better to focus on financial goals.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Without Nvidia, Tesla, and others, market underperformance is almost inevitable.

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.

An illustration of a car embedded in a computer chip.

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 (MSFT 1.50%)



3.47 percentage points

Apple (AAPL 1.56%)



1.30 percentage points

Amazon (AMZN 1.26%)



0.52 percentage points

Alphabet (GOOGL 2.81%) (GOOG 2.65%)



1.58 percentage points

Tesla (TSLA 6.24%)



1.36 percentage points

Meta Platforms (META 1.97%)



0.53 percentage points

Nvidia (NVDA 1.44%)



3.03 percentage points

Berkshire Hathaway (BRK.A 0.83%) (BRK.B 1.21%)



0.27 percentage points

JPMorgan Chase (JPM 1.21%)



0.33 percentage points

Home Depot (HD 3.42%)



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.

Chart comparing the performance of the 10 stocks discussed in the article with the S&P 500's for 2021.

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

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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.