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Is the S&P 500 and Chill Strategy Still Safe?
ProfitByFriday.com
Is the S&P 500 and Chill strategy still safe?
The top 10 stocks now make up 37% of the entire index. Last time concentration hit these levels, the index took thirteen years to recover.
Most investors believe they are diversified when they own the S&P 500. They are not. When you buy the index today, 37 cents of every dollar goes into 10 companies. Almost all of them are in the same sector. Almost all of them move together.
The other 490 companies share the remaining 63 cents. You are not owning 500 companies. You are owning a concentrated bet on 10 businesses with 490 decorative positions attached to make it feel safer than it is.
In this episode:
- Why today's S&P 500 concentration is higher than the dot-com peak of 2000
- What happened to cap-weight vs equal-weight investors from 2000 to 2013
- Three structural forces making concentration worse automatically every year
- Three practical upgrades that do not require abandoning the index
Full written analysis:
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