You read here about the late Jack Bogle’s concerns with index funds. Now they’ve crossed an ominous threshold: the market cap of the top five companies in the S&P 500 index represent 18% of the total index capitalization, higher than any time on record, including the Tech Bubble. Those five companies include Apple, Microsoft, Alphabet (Google), Amazon, and Facebook.
When mutual funds and ETFs have a mandate to buy an index of stocks, like those in the S&P 500, research and analysis go out the door—there’s zero analysis—because the purchases are required. In replicating an index, the largest capitalization stocks come to dominate a portfolio. With the S&P 500, it’s the largest five that play the music—the rest are just groupies.
Before the music stops, perhaps you should seek an approach where stocks are picked according to their individual value.
Twice this century the S&P 500 has crashed; first by more than 49% when the Tech Bubble burst, and then by more than 56% during the Financial Crisis. Perhaps it’s time for a change.
Retirement Compounders® Investment Program Helps You Stay the Course
Young Research’s low-risk Retirement Compounders® program helps investors avoid the emotionally charged investment decisions that can sabotage returns. Investing in high-quality businesses with long records of regular dividend payments offers the comfort and confidence necessary to stay the course when financial and economic stress arise. The end result is often greater long-term returns for investors.
How has the Retirement Compounders® program performed relative to expectations?
During the last major bear market, the Retirement Compounders® program held up better than the broader market just as they were designed to do. And since one of the most speculative liquidity fueled rallies in history began in the spring of 2009, the Retirement Compounders® program delivered 90% of the market’s return with only about 85% of the risk.
In the time since inception, which includes two speculative bull-runs and a nasty bear market, the Retirement Compounders® program performance has far exceeded expectations. The chart below shows that since inception, the Retirement Compounders® program has outperformed the MSCI All-Country World Index (ACWI) and the S&P 500.
Originally posted on Your Survival Guy.