It’s tough to beat the index and this is why

Morgan Stanley has released a note saying that one of the main reasons it’s tough to beat the S&P is that when new stocks are added to the index they tend to be massive outperformers. “The earnings growth of the companies added to the index was not only much superior to the companies removed but also much higher than those companies already in the index.” The Morgan Stanley analysts suggest this “causes a substantial, structural upward bias to the earnings growth of the S&P500 index.” (VIEW LINK)