Data from the latest Forbes 400 list proves the power of index funds

Not so gilded? The richest Americans had a below-market return on their wealth last year, and that's not so unusual.

The 400 richest Americans would collectively have performed better over the past 12 months had they invested their net worths in an S&P 500 index fund.

That conclusion emerges from the recently released 2026 edition of the Forbes 400 list of richest Americans. Forbes reports that the combined wealth of this select group was about 21% higher on Sept. 4 than the comparable total of those on the 2025 list. That's slightly less than the 21.7% total return of the S&P 500 SPX over the same period.

These richest Americans' below-market return is not unusual, furthermore, as you can see from the above chart. The increase in their combined net worth was lower than the S&P 500's return in eight of the past 10 years, and cumulatively over the past decade it has lagged by 1.3 annualized percentage points.

Many are surprised by these results, since they believe that the rich and famous must have some secret sauce that explains their much-vaunted status at the top of the wealth ladder. These skeptics inevitably point to Elon Musk, who this summer became the world's first trillionaire when SpaceX (SPCX) went public - and whose net worth rose more than 100% over the past year, according to Forbes' calculations.

Yet Musk's return over the past year is more the exception than the rule. Between the 2022 and 2023 editions of the Forbes 400, for example, Musk's net worth stayed flat. And it fell between the 2023 and 2024 editions. Furthermore, not all of last year's richest Americans gained ground over the past 12 months. Michael Bloomberg's net worth fell by more than $14 billion, for example, according to Forbes. President Donald Trump's net worth fell by $300 million.

If these richest Americans on average have trouble consistently beating the S&P 500, given the armies of high-paid investment professionals helping to manage their finances, what makes you think you can do any better?

A widespread belief for many years was that the rich and famous had access to much-better-performing investments than were available to the rest of us - such as private equity. But as has become increasingly clear, private equity is not the panacea that many made it out to be. Not only has private equity lagged the S&P 500 in recent years, its correlation with public markets is very high. That means it is not immune from the stock market's ups and downs.

This points to yet another reason why the richest Americans should stick to index funds: There is an extremely high correlation between the S&P 500's annual returns and the yearly increases in their combined wealth. The correlation coefficient between the chart's two data series is 97%, in fact - only slightly lower than the 100% reading that would mean there is a perfect correlation.

The implication is that the same tide that lifts our portfolios' boats lifts those of the richest Americans as well. While they may inhabit a different world than the rest of us in other respects, they live and die along with the rest of the investment world when it comes to investing.

The bottom line: Stop drooling about them and do what they should have been doing all along: Invest in index funds.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

-Mark Hulbert