Twenty years after the Tech Bubble decimated investors’ savings, there are echos of it in the S&P 500. Reuters‘ Noel Randewich and lewis Krauskopf report:
At the height of the dot-com era, technology stocks accounted for over 35% of the S&P 500’s value. Today, the tech sector accounts for about 25% of S&P 500 market capitalization, according to Refinitiv Datastream. But combining the tech sector with the communications sector, which includes Internet-related companies like Alphabet, Facebook and Netflix (NFLX.O), the group accounts for 35% of the S&P 500.
There is growing unease with the trajectory of growth stocks, and especially with their outsized influence on index funds.
One of the fundamental ways you should prepare your portfolio for volatility is by diversification. Harry Markowtiz proved the value of diversification back in 1952 with his Efficient Frontier. Diversification can improve the risk-adjusted performance of your portfolio.
If you’re relying on an index fund to give you the diversification you need to protect your assets, you need to learn the truth behind the S&P 500 and other market indexes like it.
Originally posted on Your Survival Guy.