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> Diversify, be reasonable and be prepared for it to happen someday. Indeed, but even with something like SPY, there’s quite the concentration in tech: To
by koolba 1y ago
> Diversify, be reasonable and be prepared for it to happen someday.
Indeed, but even with something like SPY, there’s quite the concentration in tech:
Top 10 Holdings (37.99% of Total Assets)
NVDA 8.07%
MSFT 7.37%
AAPL 5.77%
AMZN 4.11%
META 3.12%
AVGO 2.57%
GOOGL 2.08%
GOOG 1.68%
BRK-B 1.61%
TSLA 1.61%
Now that’s intentional as it’s market cap weighted. But the investing world is in for a rude awakening if things start to pop.
- jonfromsf 1y agoJust buy $RSP or a similar equal-weightage ETF.
- abraxas 1y agoThose techniques rarely worked in the past as the broad stock market retreat usually affects stocks across the board. The best diversification is into uncorrelated asset classes. But there is some art in determining what's likely to remain uncorrelated. Bonds and gold are usually decent guesses.
- jonfromsf 1y agoThey certainly solve the stated problem of concentration in a few tech companies. But I agree, non-tech companies are overvalued. Bonds are terrifying, they’re a bet against inflation and in favor of the US dollar. MLPs and oil companies are a nice place to stash money because they aren’t correlated with tech. MLPs flow about 7% tax free yield which isn’t bad. Bitcoin and Gold are good hedges against inflation.
- lokar 1y agoWe need a etf that weights with the log of the market cap
- it_citizen 1y agoI don't think putting all your net worth in S&P would be considered diversified. With an MSCI world, those companies would drop to ~22% exposure. Throw a bit of real estate, more exposure to your home country if you are not in the US some real estate, some bonds and you can make it drop to <10%.
- ac29 1y agoI'd argue only four of those are purely tech companies (NVDA, MSFT, AAPL, AVGO). AMZN does tech stuff, but also retailing, grocery, logistics, media and more. META and GOOG are advertising businesses. BRK is a basically a holding company, its businesses are in a wide variety of markets, mostly non-tech (and it owns public equity too). TSLA is a car manufacturer.