NASDAQ Has a Diversity Problem

Did you know there are over 3,000 companies in the Nasdaq Composite, and that the index is market weighted—i.e. the biggest companies have the most impact? Apple, Facebook, Amazon.com, Microsoft, and Google comprise 40% of the index’s gains this year according to Birinyi Associates. And they combine to represent 29% of the index’s market capitalization. That’s a lot of money in a handful of stocks. Owning an index of 3,000 stocks doesn’t always mean diversification.