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02-10-2020, 01:08 PM
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#1
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gone traveling
Join Date: Dec 2015
Location: Berkeley, Denver, CO, USA
Posts: 1,406
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S&P 500 is not diverse
"Dave Rosenberg had an interesting set of observations in today's Breakfast with Dave. https://www.rosenbergresearch.com
The five largest stocks (Apple, Alphabet, Facebook, Microsoft and Amazon) now comprise nearly one-fifth of the entire S&P 500 market cap.
This is the highest concentration since the dotcom bubble peak of 2000."
Danger, Will Robinson ?
What are decent index alternatives to the S&P 500?
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02-10-2020, 01:32 PM
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#2
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Administrator
Join Date: Apr 2006
Posts: 23,041
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Vimax ?
__________________
Living an analog life in the Digital Age.
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02-10-2020, 01:34 PM
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#3
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Recycles dryer sheets
Join Date: Jan 2017
Location: TX
Posts: 102
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Instead of cap-weighted, perhaps consider SP500 equal weighted index? An available ETF trades under symbol RSP.
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02-10-2020, 01:35 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,266
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You have a good point. Alas, the really, really Big Boys and Girls can dominate a number of smaller companies.
I am reminded of this joke: Six blue collar working guys are sitting at a bar drinking beer. The group's average net worth is $60,000. Bill Gates wanders in and joins them. The group's average net worth is now $6,000,000,000.
Sometimes size counts.
__________________
Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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02-10-2020, 01:46 PM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,353
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I want nothing to do with sector indexes like the S&P. We own only total market indexes, primarily VTWAX.
That said, the S&P is hard to avoid as IIRC it is about 80% of the US market cap and about 45% of the world market cap. There are some funds that are "total market except S&P" that might be used I'd guess but we have not done that.
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02-10-2020, 02:03 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jun 2014
Posts: 1,192
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Just to put that in perspective I found an article from Jan 2019 that stated the top 10 holdings were 20% of the SP500, so the big 5 pushed the next 5 out.
My allocation is totally wonky so I have no advice on picks that I think anyone else should follow.
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02-10-2020, 02:43 PM
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#7
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gone traveling
Join Date: Sep 2018
Location: Washington, DC
Posts: 575
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I remember seeing something in a post here that Total Market and SP500 were basically within .1% of each other long term.
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02-10-2020, 02:46 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Mar 2018
Posts: 3,516
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Quote:
Originally Posted by OldShooter
I want nothing to do with sector indexes like the S&P. We own only total market indexes, primarily VTWAX.
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You're calling an index fund with 500 components a "sector" fund?
Quote:
That said, the S&P is hard to avoid as IIRC it is about 80% of the US market cap and about 45% of the world market cap. There are some funds that are "total market except S&P" that might be used I'd guess but we have not done that.
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No kidding.
VTWAX-Top-Ten.jpg VFINX-Top-Ten.jpg
__________________
Age is a very high price to pay for maturity.
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02-10-2020, 03:17 PM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,353
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Quote:
Originally Posted by Qs Laptop
You're calling an index fund with 500 components a "sector" fund? ...
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Sure. It's 100% large cap US stocks.
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02-10-2020, 03:43 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,985
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Quote:
Originally Posted by Chuckanut
You have a good point. Alas, the really, really Big Boys and Girls can dominate a number of smaller companies.
I am reminded of this joke: Six blue collar working guys are sitting at a bar drinking beer. The group's average net worth is $60,000. Bill Gates wanders in and joins them. The group's average net worth is now $6,000,000,000.
Sometimes size counts.
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Yeah but they're still only worth 60k without Gates. Or whatever each of them is individually worth. What Bill Gates is worth has nothing to do with me.
In other words, he's made his money. I still have to make a decision regarding the future.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
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02-10-2020, 04:28 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Nov 2015
Posts: 2,692
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I guess looked at another way, as those top companies go the rest of the economy and companies will too. Those are large enough to move the needle of any set of funds regardless if they are directly included or not
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02-10-2020, 04:30 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Nov 2015
Posts: 2,692
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Quote:
Originally Posted by foxfirev5
Yeah but they're still only worth 60k without Gates. Or whatever each of them is individually worth. What Bill Gates is worth has nothing to do with me.
In other words, he's made his money. I still have to make a decision regarding the future.
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But in case of the real economy those big companies will have an impact on smaller. Either for goods, services, lending, support services, trickle down economics, etc . So if "Bill" fails those other 5 will feel the pinch as well.
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02-10-2020, 08:18 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,376
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Quote:
Originally Posted by OldShooter
....There are some funds that are "total market except S&P" that might be used I'd guess but we have not done that.
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Vanguard's is the Extended Market Index Fund. We own some to balance out some VFIAX that we own. ~75% VFIAX + 25% VEXAX ~ VTSAX as I recall.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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02-11-2020, 04:07 AM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,725
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Quote:
Originally Posted by Qs Laptop
You're calling an index fund with 500 components a "sector" fund?
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I recall a similar comment being made in another thread. The bottom line may have been than there are sectors within a market index fund like S&P 500, but to a great extent those who write about investing do not call the S&P 500 a sector.
I call the S&P 500 a category, but that may be incorrect too.
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02-11-2020, 04:41 AM
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#15
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Full time employment: Posting here.
Join Date: Jun 2016
Posts: 889
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Quote:
Originally Posted by OldShooter
I want nothing to do with sector indexes like the S&P. We own only total market indexes, primarily VTWAX.
That said, the S&P is hard to avoid as IIRC it is about 80% of the US market cap and about 45% of the world market cap. There are some funds that are "total market except S&P" that might be used I'd guess but we have not done that.
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Personally i have felt for years that the s&p 500 companies market caps are partially dependent on being part of the index due to the automatic order flow from index investors.
Whether to ride that bus and enjoy the profits or avoid that bus because it may crash at some point is debatable.
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02-11-2020, 04:48 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2015
Location: Michigan
Posts: 5,003
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Quote:
Instead of cap-weighted, perhaps consider SP500 equal weighted index? An available ETF trades under symbol RSP.
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+1. And VTI is the Vanguard Total (US) Market ETF.
__________________
"The mountains are calling, and I must go." John Muir
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02-11-2020, 05:04 AM
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#17
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gone traveling
Join Date: Mar 2017
Posts: 284
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Without taking a position on whether or not it is a good thing, the reason those 5 companies are so big is that investors vote with their money based on many factors. It may be that Amazon is overpriced, but the scale of what they are doing seems almost unprecedented. My AA is 50-50, and I have both Fidelity’s S&P and the full market index.
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02-11-2020, 08:26 AM
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#18
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Thinks s/he gets paid by the post
Join Date: Sep 2006
Posts: 2,844
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In claiming the S&P500 is not diverse, is there any part of the business economy that these 500 companies do not cover/ and or are not the primary competition for any business. Before everyone agrees the S&P500 is just a sector, please identify the sectors they do not cover, and being more successful than any other business does not make you a sector, that is only a matter of size. It's like saying I don't want to own large Amazon I'd rather own mom and pop specialty stores, when Amazon has all the Mom & Pop specialty stores on their website, earning commissions from their sales and making better use of their data than they could ever hope to do on their own.
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02-11-2020, 08:39 AM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,154
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Quote:
Originally Posted by davebarnes
"Dave Rosenberg had an interesting set of observations in today's Breakfast with Dave. https://www.rosenbergresearch.com
The five largest stocks (Apple, Alphabet, Facebook, Microsoft and Amazon) now comprise nearly one-fifth of the entire S&P 500 market cap.
This is the highest concentration since the dotcom bubble peak of 2000."
Danger, Will Robinson ?
What are decent index alternatives to the S&P 500?
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No, it never has been, it’s large cap stock. I use total stock market index and also have medium and small cap index funds, and some international. So I end up with a small-mid cap tilt.
__________________
Retired since summer 1999.
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02-11-2020, 08:44 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,154
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Quote:
Originally Posted by OldShooter
Sure. It's 100% large cap US stocks.
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+1
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Retired since summer 1999.
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