Closet_Gamer
Thinks s/he gets paid by the post
Having just turned 50 and with FIRE getting close in the headlights, I'm doing a very structured review of my AA.
As many will know: I am a passionate indexer and AA...
...but the shocking concentration of Apple, MSFT, Google, AMZN and TSLA within the big indices has my attention.
I did my math a few days ago, so these things might have wiggled around, but I think are still on point. By my math, these five are companies are:
40% of the NASDAQ 100
24% of the S&P 500
~15% of a big Vanguard fund I have in my 401K
Apple + MSFT are 9% of the DJIA.
The concentration continues. Around 35% of the S&P is in 15 companies.
The PEs on these are huge, predicated on forward PEs that require amazingly strong/consistent growth. Other large, healthy companies with wide moats and strong balance sheets make up 0.5% or less of S&P 500.
If any of these huge companies gets the sniffles, the indices will all catch a severe cold.
As an indexer, I know colds come and go, but really?
Have the major indices ever been this concentrated?
I'm broadly diversified (Small caps, Intl, fixed income, REITs), and was surprised to find that these five companies represent 10% of all my holdings.
For the first time in a long time, I'm considering trying and step away from this concentration by specific adding in a value tilt:
VTV -- Vanguard Value ETF, PE of 14 & yield of 2.1%
None of these companies in the top 30+ holdings.
Curious:
Is anyone else thinking about this concentration issue?
Plan to do anything about it?
Thanks
As many will know: I am a passionate indexer and AA...
...but the shocking concentration of Apple, MSFT, Google, AMZN and TSLA within the big indices has my attention.
I did my math a few days ago, so these things might have wiggled around, but I think are still on point. By my math, these five are companies are:
40% of the NASDAQ 100
24% of the S&P 500
~15% of a big Vanguard fund I have in my 401K
Apple + MSFT are 9% of the DJIA.
The concentration continues. Around 35% of the S&P is in 15 companies.
The PEs on these are huge, predicated on forward PEs that require amazingly strong/consistent growth. Other large, healthy companies with wide moats and strong balance sheets make up 0.5% or less of S&P 500.
If any of these huge companies gets the sniffles, the indices will all catch a severe cold.
As an indexer, I know colds come and go, but really?
Have the major indices ever been this concentrated?
I'm broadly diversified (Small caps, Intl, fixed income, REITs), and was surprised to find that these five companies represent 10% of all my holdings.
For the first time in a long time, I'm considering trying and step away from this concentration by specific adding in a value tilt:
VTV -- Vanguard Value ETF, PE of 14 & yield of 2.1%
None of these companies in the top 30+ holdings.
Curious:
Is anyone else thinking about this concentration issue?
Plan to do anything about it?
Thanks