Billionaire Index: Outperforms S&P 500

Dr. Joel Shulman of Babson University has published a recent study in Institutional Investor’s Journal of Index Indexing which shows that an index of companies that billionaires managed by individuals on the Forbes billionaires list. I for years have been wondering how an index would have done. Dr. Shulman has done the research and the results. Let’s look at what he found.

When the “Billionaire’s Index” was compared to a benchmark of the S&P 500 the Billionaire’s Benchmark outperformed the S&P 500 over time. From 1996-2011 the Billionaire Index increased a staggering 400%. The S&P was up over 104% during this same period (dividends not included). If you started with $1,000 in 1986 and updated your portfolio every year to match the new Forbes billionaires list you would have ended up with $5,000 by 2011. If you had invested in other benchmarks like the Russell 2000, Russell 3000, or the S&P 500 you would have $2,500 or less. It should be pointed out the Billionaire Index is riskier than indexes like the Russell 2000 or S&P 500. As investors know you should never put all your eggs in one basket.

People often complain how the top 1% keeps getting richer. However, now there is a way to join them. In fact as a shareholder you are part owner in their business! The only problem is I haven’t actually seen a Billionaire’s Index listed on any of the exchanges. Right now Dr. Shulman works for EntreprenuerShares which has some funds yet doesn’t offer a Billionaire’s Index. One problem is that if people knew the Billionaire’s Index returns were very good they would start investing in it which might actually reduce the return. Since the index has only existed in theory and not in practice it is hard to tell how it would have actually done.