Apple and Microsoft have never occupied this much of the S&P 500 Index, leaving some investors worried about the gauge’s increasingly top-heavy nature.
Subrat Patnaik for Bloomberg News:
The world’s two most-valuable companies saw their combined weightings in the benchmark jump to a record 14% this week after strong earnings reports from Microsoft and others fueled a rally in technology stocks.
“It’s concerning to have such concentration in a few names and all those companies are in the very similar tech and communication services sectors,” said Michael Landsberg, chief investment officer at Landsberg Bennett Private Wealth Management. “This concentration will drive broader market performance until it doesn’t.”
According to Tejas Dessai, an analyst at Global X ETFs, the growing influence of big tech in major indexes puts passive investors at risk of over exposure. “However, it does help that these businesses are some of the most innovative names in the technology world and none are looking at a secular decline anytime soon,” he said.
Apple and Microsoft alone have added more than $1 trillion in combined market value in 2023, nearly half of the gains for the entire S&P 500.
MacDailyNews Take: As Warren Buffett says, “Diversification is protection against ignorance.”
Those who have iron stomachs in the face of risk, year after year, can make millions of dollars with relatively very little invested, if they go “all in” on the right company long term.
On December 20, 1996, when Apple announced the acquisition of NeXT and the return of Steve Jobs, an Apple share sold for 18-cents.*
As recently as April 2003, Apple shares sold for 20-cents each.* Even on January 07, 2019, Apple closed at just $35.64*!
Anyone who invested in AAPL, even in later years, without the loss-making hedges in the name of diversification, sports an incredibly better annualized return than “legendary investor” Peter Lynch’s 29.2% (which is rather laughably weak when viewed by long-term, mainly AAPL investors).
The actual “legendary investors” would be those who began buying AAPL upon the return of Steve Jobs, never stopped buying AAPL year after year, reinvested dividends in AAPL every quarter, never wasted money on diversification in the name of mitigating risk (which also, in the absence of investing perfection (which does not exist), mitigates profit), but who instead went all in on AAPL and never sold a share. – MacDailyNews, April 25, 2023
*Prices adjusted for splits and dividend distributions.
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The post Apple and Microsoft make the S&P 500 top-heavy appeared first on MacDailyNews.
