The S&P500 has Become the S&P7 in 2023

[Qs Laptop]

Take a look at this chart. Should be self-explanatory. Yes, this is selective endpoint picking that shows sometimes there is a downside to index investing.

 

[OldShooter]

Take a look at this chart. Should be self-explanatory. Yes, this is selective endpoint picking that shows sometimes there is a downside to index investing.

View attachment 47264

J.P. Morgan's famous market prediction "It will fluctuate." seems well supported by your chart, but so what? Index investing is about buy and hold for periods measured in years. Wiggles and gyrations in a 9 month period is a complete don't-care for me. When I pull up trend charts (which is rare) I immediately click on the "5 Year" view. Anything much less than this is just noise.

 

[jebmke]

I think "the market" is frequently dominated by a handful of stocks. owning the broad market means you don't have to know which ones in advance.

 

[Qs Laptop]

When I pull up trend charts (which is rare) I immediately click on the "5 Year" view. Anything much less than this is just noise.

When I compare a couple of mutual funds I start at the 10 year chart, then the 5 year, and finally the 3 year. But, yes, the 5 year is like the sweet spot for me.

 

[Jerry1]

Another factor is market weighting. I’m assuming that those 7 companies are the highest weighted in the index and therefore move the S&P500 more than the other 497 stocks. In other words, I don’t think the graph would look as dramatic if it were fully weighted.

 

[Luvtoride]

J.P. Morgan's famous market prediction "It will fluctuate." seems well supported by your chart, but so what? Index investing is about buy and hold for periods measured in years. Wiggles and gyrations in a 9 month period is a complete don't-care for me. When I pull up trend charts (which is rare) I immediately click on the "5 Year" view. Anything much less than this is just noise.

+1 Any investment in S&P index funds go out at least 5 years before I plan to need them.

Curious, which are the 7 stocks that make up the S&P 7?

 

[Qs Laptop]

Curious, which are the 7 stocks that make up the S&P 7?

Apple, Alphabet, Meta, Microsoft, NVIDIA, Amazon, and Tesla.

 

[11522914]

Here is an article that provides a lot more detail. It shows the S&P 500 depends on 8 giants.

https://wolfstreet.com/2023/09/27/t...-depends-on-8-giants-but-theyre-swooning-too/

Stocks in the S&P 500 Equal Weight index [IQX] are not weighted by market capitalization. It contains the same stocks as the S&P 500 index, but each stock weighs the same within the index. The purpose is to see if the performance of a small number of stocks with huge market capitalizations is driving the overall index and is in effect hiding what is happening to the rest of the market.

The S&P 500 Equal Weight index today fell into the negative year-to-date (-0.6% YTD at the moment), after having dropped over 9% since July 31.

 

[OldShooter]

Another factor is market weighting. I’m assuming that those 7 companies are the highest weighted in the index and therefore move the S&P500 more than the other 497 stocks. In other words, I don’t think the graph would look as dramatic if it were fully weighted.

Almost all index funds are cap weighted. Stocks issued x current price. So the fund just rides the tide and doesn't need to do any trading. From time to time there have been proposals and even funds that are "equal weighted" where IIRC Microsoft and itty-bitty widget company fund holdings (dollars) are equal. I don't recall any evidence that this works consistently and it has the problem of forcing a lot of trading, expensive both for the fund expense ratio and for the owner/taxpayers. https://www.investopedia.com/terms/e/equalweight.asp

 

[FLSUnFIRE]

It's always been that way. This has been shared before but always neat to watch:

Interesting chart of the top one year returns too (few overlaps with the top spots which isn't surprising):


https://www.visualcapitalist.com/top-sp-500-stocks-by-annual-returns/

 

[foxcreek9]

Back in the 70s they were the nifty 50


https://bridgeway.com/perspectives/...the-nifty-fifty-teach-us-about-todays-market/

 

[USGrant1962]

Is it always the same 7 or 8 giants? I don’t think so although changing of the guard might take a long time.

Watch the video in Post #10.

 

[audreyh1]

Watch the video in Post #10.

Right, just saw that and deleted my post. Very cool visual!

Just for fun I took screen shots at the start of each decade. Then you can really see the changing of the guard and how different sectors are favored over time.

 

[gcgang]

I don’t own index funds (hate the high internal fees -lol), just own a boatload of stocks.

I was kind of concerned when I noticed what a high percentage I had in just a few stocks. Then I looked at the composition of the index.

I don’t want to sell and pay the cap gains, but I feel MUCH better knowing that I in the same boat as the indexers. Just hope there’s enough lifeboats for us all.

 

[Al18]

RSP is Invesco’s Equal Weight S&P500 ETF - it’s flat for the year. With the 10 year US Treasury yield at 4.579%, it shouldn’t be hard to understand why people are dumping their stocks.

 

[Markola]

Apple, Alphabet, Meta, Microsoft, NVIDIA, Amazon, and Tesla.

I’d never heard of NVIDIA until this year.

I wouldn’t put $5 into Tesla, except for the index fund, given Musk’s volatility, personal brand problems and with every car maker going electric.

Amazon is in anti-trust litigation, and Google is under major government scrutiny.

What happened to Netflix, which was flying so high two years ago?
It was the N in FAANG.

I recall when Walmart and Exxon were unstoppable. One can’t predict this stuff.

 

[HI Bill]

I’d never heard of NVIDIA until this year.

Nvidea has been well-known to gamers for their high-end graphics cards, and the Nvidea Shield streamer. Also known to video editors and colorists. But their meteoric rise (per my limited understanding) came through the use of their graphics cards to mine Bitcoin.

 

[HI Bill]

I don’t own index funds (hate the high internal fees -lol), just own a boatload of stocks.

Don't many stocks come with trade commissions? With VG's investor-owned funds, their fees are miniscule (e.g., 0.03% for VTI). Then, there's the bid-ask spread for single stocks to consider... (I only own one single stock, which is my former employer's).

 

[Al18]

There are no stock trading fees with most of the big brokerages if you trade online. The fees disappeared about a decade. However if you want to call your broker to place a trade, that will likely cost you $10.

 

[freedom2022]

Looks like we can't buy and hold forever.
Buy and hold for 10 - 20 years only?

 

[target2019]

Watch the video in Post #10.

I think we have an E-R meme here. Investor asks about <x>, first response should be, "Watch the video in Post #10."

 

[Exchme]

Take a look at this chart. Should be self-explanatory. Yes, this is selective endpoint picking that shows sometimes there is a downside to index investing.

View attachment 47264

That is a very strange leap from the top 7 stocks performing great to "a downside to index investing".

In fact an S&P 500 index investor would be 27.86% invested in the top 7 companies. A Total Market investor would be 23.77% invested in them.

There will always be something better than an index, the point is that you are no more likely to find the magic investment ahead of time than the other market participants - maybe less so since, unlike the big money, you do not have the industry and government contacts, army of PhDs or banks of supercomputers.

What you do have is the "cheat code" of the market price that rolls in all that knowledge, so you can simply ride along in a capitalization weighted index and take advantage of everyone else's insight into what is going to do well vs. poorly. The bonus is that the index is also very tax as indices rarely have to buy or sell anything.

 

[ERD50]

Originally Posted by Qs Laptop View Post
Take a look at this chart. Should be self-explanatory. Yes, this is selective endpoint picking that shows sometimes there is a downside to index investing.

Attachment 47264

That is a very strange leap from the top 7 stocks performing great to "a downside to index investing".

In fact an S&P 500 index investor would be 27.86% invested in the top 7 companies. A Total Market investor would be 23.77% invested in them.

There will always be something better than an index, the point is that you are no more likely to find the magic investment ahead of time ....

Nailed it!

The key here is, those top stocks that outperformed - well, you'd need to know that ahead of time. It's shooting fish in a barrel to find out-performers in the rear-view mirror.

So can I invest in the top 7 stocks of the S&P, and swap them out as they rotate, and outperform the S&P (after taxes - or even in an IRA)? Something tells me that's been back-tested, and doesn't work well enough to want to jump in. But I'm all ears/eyes if someone can post that analysis and it looks compelling.

-ERD50

 

[GaryInCO]

Nvidea has been well-known to gamers for their high-end graphics cards, and the Nvidea Shield streamer. Also known to video editors and colorists. But their meteoric rise (per my limited understanding) came through the use of their graphics cards to mine Bitcoin.

I'm pretty sure Bitcoin mining has been far surpassed by AI applications. NVDA figured out early that their graphics cards (containing many small processors) were a perfect match for the calculations needed for Bitcoin and for AI (training neural networks &etc). Since then they've changed their development process to aim at those markets, and they've been VERY successful.

 

[FIREarly]

Curious, which are the 7 stocks that make up the S&P 7?

Apple, Alphabet, Meta, Microsoft, NVIDIA, Amazon, and Tesla.

So close to alphabetical!

Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla.

You're welcome ?