LEFT / THE BENCHMARK
Buy. Hold. Sell once.
SPY compounds through the selected calendar years. Estimated tax on distributions is paid annually; remaining appreciation is taxed once at the end.
SAME $100,000 · SAME YEARS · AFTER TAX
Beating SPY means beating the drag.
Buy-and-hold gets time, a lower long-term rate, and one final sale. A day trader must clear taxes, trading friction, and the benchmark—again and again.
01
Move the years.
THE AFTER-TAX RACE
Move the years.
Make the trader catch up.
RIGHT / THE HURDLE
Trade. Pay. Catch up.
The solver finds the constant annual gross strategy return required to finish with exactly the SPY after-tax value.
HISTORICAL WINDOW
2006–2025 · 20 calendar years
SPY total return includes reinvested distributions.
SPY CAGR / BEFORE TAX
—
Gross annualized return
SPY CAGR / AFTER TAX
—
After distribution and final-sale tax
- After-tax ending wealth
- —
- Before investor-level tax
- —
- Distribution tax
- —
- Tax on final sale
- —
- Tax drag + lost growth
- —
01$100k invested→02Hold the path→03One final sale
TRADER CAGR NEEDED / BEFORE TAX + COSTS
—
—
MUST BEAT SPY BY · ANNUAL PERCENTAGE-POINT HURDLE OVER SPY
—PERCENTAGE POINTS / YEAR
—
- Matched ending wealth
- —
- No-drag gross value
- —
- Estimated taxes removed
- —
- Estimated trading drag
- —
- Drag + lost growth
- —
READ IT THIS WAY
—
TAX RATE GUIDE · 2026 FEDERAL THRESHOLDS
Why these rates?
The simulator asks for a marginal rate because your total taxable income and filing status—not the size of this account alone—decide which dollars fall into each bracket.
0%, 15%, or 20%—not 5%.
For 2026, the 0% band tops out at $49,450 single / $98,900 joint. The 15% band extends to $545,500 single / $613,700 joint; gains above that generally enter 20%. The simulator defaults to 15% because the IRS says most individuals’ net long-term capital gains are taxed no higher than 15%; select 20% only when that higher federal band fits.
Ordinary-income brackets.
Net short-term gains are generally taxed at the same graduated federal rates as ordinary income: 10%, 12%, 22%, 24%, 32%, 35%, or 37% for 2026.
A separate 3.8% layer.
The Net Investment Income Tax can apply above modified-adjusted-gross-income thresholds, including $200,000 single and $250,000 married filing jointly. It is not automatic for every investor.
One scenario, both paths.
State rules and rates vary widely. The 5% option is a transparent round-number scenario—not a national average. California has no special lower capital-gain rate, and New York folds investment gains into state taxable income. The selected state rate applies symmetrically; city tax and the federal effect of state deductions are excluded.
WEALTH PATH
Compounding rises. Tax payments step down.
Click and drag a box to zoom both axes · scroll or use +/− to zoom · arrow keys pan after zooming · double-click the chart or press reset to restore the full view.
SPY is shown compounding smoothly before one final tax reconciliation. The after-tax active path steps down when tax cash leaves and just matches SPY. The required-return path shows the same strategy after trading drag but before tax drag.
OPEN THE YEAR-BY-YEAR SPY LEDGER20 rows
| Year | SPY total return | Price return | Distribution component* | After-tax balance |
|---|
*Total return minus price return is used as an annual approximation of the reinvested distribution contribution; it is not the fund’s quoted dividend yield.
02
Trades are frequent.
WHAT “PAYING MORE OFTEN” REALLY MEANS
Trades are frequent.
Federal tax is annual.
Net gains and losses meet on the return.
Short-term gains are generally taxed as ordinary income, but the IRS does not assess a separate income tax each time the buy button becomes the sell button.
Estimated tax is pay-as-you-go.
Many traders need quarterly estimated payments. Moving that cash out of the account earlier can reduce what remains available to compound.
“Day trader” is not automatically tax-trader status.
Trader tax status and a timely §475(f) election can change wash-sale, loss, and mark-to-market treatment. The simple calculator does not determine eligibility.
RETURN PARITY IS NOT LIFE PARITY.
A matching ending balance still ignores labor, screen time, strategy capacity, tail risk, leverage, drawdowns, and the possibility that a volatile return path demands a higher geometric average.
03
Famous wins exist.
THE TRACK-RECORD REALITY
Famous wins exist.
A clean census does not.
“BEAT SPY FOR 20 YEARS” MEANS ONE CONTINUOUS 20-YEAR CAGR WIN.
It does not mean winning every calendar year or every rolling 20-year window. Private hedge funds do not publish one complete, survivor-neutral database, so the examples below are documented records—not a count of every fund that tried.
WARREN BUFFETT · THE CLOSEST PUBLIC LONG-RUN CONTROL
Berkshire is a company, not a hedge fund.
Berkshire’s official table reports a 19.7% annual compound gain in per-share market value from 1965–2025, versus 10.5% for the S&P 500 with dividends. That return already reflects taxes paid inside Berkshire; the “after tax” figure here adds only a hypothetical investor-level tax on one final sale.
BERKSHIRE CAGR / BEFORE INVESTOR TAX+19.70%61-year reported market-value CAGR
BERKSHIRE CAGR / AFTER FINAL SALE—Using the selected long-term tax profile
$100K GROSS ENDING VALUE—Mechanical compounding at 19.7%
$100K AFTER-TAX ENDING VALUE—One modeled final sale; no annual distributions
DOCUMENTED CONTINUOUS SPANS
Examples that clear each horizon.
Named examples plus a survivor-aware public-fund base rate. Returns are before investor-specific taxes.
WHAT CAN ACTUALLY BE COUNTED
Counts versus examples: the 5-, 10-, and 20-year cards use SPIVA’s aggregate U.S. active large-cap result. Their denominator is every fund available at the start—including funds later liquidated or merged—and a fund counts as a winner only if it survived and beat the S&P 500. SPIVA publishes this standardized U.S. table only through 20 years, so it supplies neither a 25- nor 30-year count. The separate lifetime study in the last card is context, not a substitute 30-year rate. A worldwide hedge-fund share is omitted because no public, worldwide, survivor-neutral database reports it.
“LARGE-CAP”
Describes what a fund owns—not whether its management company is publicly traded. Here it means an active U.S.-domiciled retail mutual fund or ETF that Lipper classifies as large-cap because at least 75% of its three-year weighted equity allocation falls in Lipper’s large-company range.
“BEAT THE S&P 500”
Finished the exact period with a higher cumulative return than the S&P 500, after fund fees and before personal taxes. SPIVA uses the S&P 500 index—not the SPY ETF itself; SPY tracks that index but has its own small expense drag.
THE DENOMINATOR
All funds available at the beginning of the period. Funds that later close or merge stay in the denominator, so the percentage is not calculated from survivors alone.
Counted window: the trailing five years ended Dec. 31, 2025. The aggregate result is one specific period—not an average of every rolling five-year window.
- FUNDS THAT SURVIVED AND BEAT THE S&P 500
- ≈81
- TOTAL FUNDS AT START · INCLUDING LATER CLOSED / MERGED
- 734
- SHARE OF ALL FUNDS AVAILABLE AT START
- 11.04%
EXAMPLES
Two named examples shown; the longer five-year list is intentionally truncated.
Fidelity Select Technology Portfolio
- FUND CAGR · AFTER EXPENSES
- 15.49%
- S&P 500 CAGR · SAME 5 YEARS
- 14.42%
Five years ended Dec. 31, 2025. This concentrated technology-sector fund beat the broad index, but trailed its own technology-sector benchmark.
- $100K AFTER FUND FEES / BEFORE PERSONAL TAX
- —
- AFTER ONE MODELED FINAL SALE
- —
- INVESTOR CAGR AFTER THAT SALE
- —
Baron Durable Advantage Fund · Retail Shares
- FUND CAGR · NET OF OPERATING EXPENSES
- 16.17%
- S&P 500 CAGR · SAME 5 YEARS
- 14.42%
Five years ended Dec. 31, 2025. Baron reports the retail-share performance net of annual operating expenses.
- $100K AFTER FUND FEES / BEFORE PERSONAL TAX
- —
- AFTER ONE MODELED FINAL SALE
- —
- INVESTOR CAGR AFTER THAT SALE
- —
Counted window: the trailing ten years ended Dec. 31, 2025. The aggregate result is one specific period—not an average of every rolling ten-year window.
- FUNDS THAT SURVIVED AND BEAT THE S&P 500
- ≈135
- TOTAL FUNDS AT START · INCLUDING LATER CLOSED / MERGED
- 937
- SHARE OF ALL FUNDS AVAILABLE AT START
- 14.41%
EXAMPLES
Two named examples shown; the longer ten-year list is intentionally truncated.
Fidelity Select Semiconductors Portfolio
- FUND CAGR · AFTER EXPENSES
- 30.28%
- S&P 500 CAGR · SAME 10 YEARS
- 14.82%
Ten years ended Dec. 31, 2025. This is a concentrated semiconductor-sector fund, not a diversified large-cap mandate; it also slightly beat its semiconductor benchmark over the same period.
- $100K AFTER FUND FEES / BEFORE PERSONAL TAX
- —
- AFTER ONE MODELED FINAL SALE
- —
- INVESTOR CAGR AFTER THAT SALE
- —
Peter Lynch · Magellan · 13 years
Fidelity says Magellan beat the market by more than 14 percentage points a year during Lynch’s tenure. Its cited account does not supply both absolute same-period CAGRs, so a take-home value is not calculated here.
- ABSOLUTE CAGR / TAKE-HOME
- Not calculated
Counted window: the trailing 20 years ended Dec. 31, 2025. SPIVA’s aggregate below is separate from the named 22-year examples.
- FUNDS THAT SURVIVED AND BEAT THE S&P 500
- ≈54
- TOTAL FUNDS AT START · INCLUDING LATER CLOSED / MERGED
- 760
- SHARE OF ALL FUNDS AVAILABLE AT START
- 7.11%
EXAMPLES
Bill Ackman · Pershing Square
- MANAGER-REPORTED NET NAV CAGR
- 16.20%
- S&P 500 CAGR · SAME 22 YEARS
- 10.70%
The span is 2004–2025. An investor in listed PSH shares could earn something different from NAV as the share-price discount or premium changes.
- $100K ON REPORTED NET-NAV BASIS / BEFORE TAX
- —
- AFTER ONE MODELED FINAL SALE
- —
- INVESTOR CAGR AFTER THAT SALE
- —
Baron Partners Fund · Retail Shares
- FUND CAGR · NET OF OPERATING EXPENSES
- 17.71%
- RUSSELL 3000 CAGR · SAME SPAN
- 11.37%
From its Apr. 30, 2003 mutual-fund conversion through Dec. 31, 2025. This source uses the Russell 3000 broad-market index—not the S&P 500 or SPY—and the leveraged fund’s expenses include interest.
- $100K AFTER FUND FEES / BEFORE PERSONAL TAX
- —
- AFTER ONE MODELED FINAL SALE
- —
- INVESTOR CAGR AFTER THAT SALE
- —
No comparable 25- or 30-year SPIVA success rate is published. SPIVA’s standardized U.S. horizon stops at 20 years. Calculating 25 or 30 years would require rerunning survivor-free fund data with one fixed starting cohort; it cannot be inferred from the 20-year result.
- PUBLISHED 25- OR 30-YEAR SPIVA COUNT
- Not available
- ALL ELIGIBLE FUND RECORDS · INCLUDING CLOSED / MERGED
- 7,883
- FUNDS WITH ALL 360 MONTHS OF DATA
- 347 / 7,883 · 4.4%
- FULL-LIFETIME CAGR FINISHED ABOVE SPY CAGR · NOT 30 YEARS
- ≈2,389 / 7,883 · 30.3%*
EXAMPLES
Will Danoff · Fidelity Contrafund
- FUND CAGR · AFTER EXPENSES
- 14.10%
- S&P 500 CAGR · SAME 35 YEARS
- 11.28%
A public mutual-fund record through 2025. The reported return is after fund expenses, before shareholder taxes.
- $100K AFTER FUND FEES / BEFORE PERSONAL TAX
- —
- AFTER ONE MODELED FINAL SALE
- —
- INVESTOR CAGR AFTER THAT SALE
- —
Jim Simons · Medallion · about three decades
An SEC-filed third-party paper cites roughly 40% annual returns; a Senate report identifies the fund as employee-only. There is no public, manager-audited, SPY-comparable series or investable public share.
- PUBLIC INVESTOR TAKE-HOME
- Not available
*The denominator is already larger than the surviving-fund population. The 1991–2020 study uses CRSP’s survivorship-bias-free database and includes eligible U.S. domestic equity funds that later closed or merged. Only 347 of 7,883 funds have all 360 months of data; 7,536 do not because they launched later, ended earlier, or both. The 30.3% means each fund’s compounded return from its first observed month through its last observed month finished above SPY’s compounded return over those exact same months. It does not mean the fund merely crossed above SPY once, stayed above throughout, or produced a 30-year win. The average observed fund life was 133 months (about 11.1 years). A worldwide hedge-fund percentage is omitted because no public, worldwide, survivor-neutral per-fund return census exists.
REPEATED TOP-HALF PERFORMANCE · YEAR BY YEAR4.5%
of active U.S. large-cap funds that ranked in the top half for calendar 2021 also ranked in the top half in every one of the next four calendar years: 2022, 2023, 2024, and 2025. This is four consecutive annual re-rankings—not merely a check at the end of 2025 and not a five-year CAGR ranking.
SHARE THAT DID NOT BOTH SURVIVE AND BEAT THE S&P 500
- 5 years
- 88.96%
- 10 years
- 85.59%
- 20 years
- 92.89%
- 25 / 30 years
- Not published
Each percentage starts with every active U.S. large-cap fund available at the beginning. A fund is a success only if it remains in operation and finishes with a higher cumulative return than the S&P 500; funds that close or merge remain in the denominator.
ONE YEAR INSIDE A FUND
What “2 and 20” does to $100,000.
This simplified example charges the management fee on starting assets, then the incentive fee on remaining positive profit. Real funds can use high-water marks, hurdles, different fee bases, pass-through expenses, and different timing.
- Gross ending value
- —
- Management fee
- —
- Performance fee
- —
- Investor value after fees
- —
- Net return, before personal tax
- —
- Illustrative personal tax
- —
- Illustrative value after fees + tax
- —
The tax line assumes every positive after-fee dollar is currently taxable at the selected short-term + NIIT + state profile. A real K-1 can allocate different character and timing, so this is deliberately conservative and not a tax-return estimate.
Before advisory fees.
It may still be after trading costs—or it may not. Read the definition. The SEC’s marketing rule generally bars an adviser from showing gross performance in an advertisement without net performance shown with equal prominence, the same periods, and the same method.
After stated fund fees, not your taxes.
Net usually reflects management and performance fees plus specified fund expenses. It normally does not include your federal, state, or local tax bill, and it may not match your share class or entry date.
Not always what listed shares earned.
For a listed closed-end vehicle such as Pershing Square Holdings, NAV performance measures the portfolio. Your stock return also includes any change in the shares’ discount or premium to NAV.
04
A hurdle calculator.
METHOD + BOUNDARIES
A hurdle calculator.
Not a tax return.
Completed calendar-year nominal total returns from 1994–2025, with distributions reinvested. Annual price returns are used to approximate the distribution component. The simulator pays estimated tax on that component annually, tracks reinvested after-tax distributions in cost basis, then taxes any remaining gain at sale. Capital-loss tax benefits are not credited.
A constant annual pre-cost return is split evenly across the selected number of cash set-asides. Trading drag is removed, then the selected combined marginal rate is removed from positive gains. Loss deductions, loss carryforwards, wash sales, §475(f), leverage, withdrawals, and intra-period volatility are not modeled.
Federal long-term rates, ordinary brackets, NIIT, and state tax depend on total income, filing status, deductions, residence, and tax year. The 5% illustrative state option is a round-number scenario, not a national average. The model applies the selected marginal inputs symmetrically. New York City income tax and any federal deduction for state taxes are excluded.
The result is the annual gross return that makes the modeled trader’s ending wealth equal the modeled SPY investor’s after-tax ending wealth. “Percentage points above SPY” compares that required rate with SPY’s gross CAGR over the same historical window.
SOURCES · ACCESSED AUGUST 19, 2026
State Street · SPY objective, expenses, and after-tax performance method ↗
ETFReplay · completed-calendar-year SPY total returns ↗
Slickcharts · completed-calendar-year SPY price returns ↗
IRS Topic 409 · capital gains and losses ↗
IRS Revenue Procedure 2025-32 · 2026 federal rate thresholds ↗
IRS Topic 429 · traders in securities and §475(f) ↗
IRS Publication 505 · estimated tax is pay-as-you-go ↗
IRS · 3.8% Net Investment Income Tax ↗
California FTB · capital gains are taxed as ordinary income ↗
New York State · personal income tax rate structure ↗
Tax Foundation · 2026 state individual income-tax rates and variation ↗
Berkshire Hathaway · 2025 shareholder letter and 1965–2025 performance table ↗
Fidelity Contrafund · 2025 and long-run manager performance ↗
Fidelity Select Technology Portfolio · 2026 summary prospectus and 2025 returns ↗
Fidelity Select Semiconductors Portfolio · 2026 summary prospectus and 2025 returns ↗
Fidelity · Peter Lynch / Magellan tenure ↗
Pershing Square Holdings · 2025 annual report and 22-year net NAV record ↗
Baron Durable Advantage Fund · 2025 performance and expense basis ↗
Baron Partners Fund · 2025 performance and long-run comparison ↗
S&P Dow Jones Indices · SPIVA U.S. Year-End 2025 ↗
S&P Dow Jones Indices · U.S. Persistence Scorecard 2025 ↗
Bessembinder, Cooper & Zhang · Mutual Fund Performance at Long Horizons ↗
SEC · Private Fund Statistics and Form PF coverage ↗
SEC · investment-adviser marketing and gross/net performance ↗
SEC public comment file · cited historical Medallion return context ↗
U.S. Senate · Medallion access and hedge-fund disclosure context ↗
Educational illustration only. Historical performance does not predict future returns. This is not investment, legal, accounting, or tax advice; consult qualified professionals for your facts.
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