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I would caution that people who think they've diversified are not. A huge portion of the S&P 500 is the top handful of companies, so an index fund may mostly en
by nitwit005 1y ago
I would caution that people who think they've diversified are not. A huge portion of the S&P 500 is the top handful of companies, so an index fund may mostly end up heavily invested in those firms.
Some people have shifted investments around to fix that, but I'm sure many people will be quite surprised.
- ndiddy 1y agoAgreed. If you look at what's in the S&P 500, 7.49% is nVidia, 6.33% is Microsoft, 4.88% is Google, 3.86% is Amazon, and 2.95% is Meta. That's over 25% of the S&P 500 in companies that will see their share prices fall heavily if there's yet another AI winter.
- nyantaro1 1y agoRight. And that without considering semiconductor manufacturing/design (AMD, TSMC, Broadcom, etc.) and other second order effects.
- rsync 1y agoUnder diversification, as you are describing, is the first ingredient… I suspect the second ingredient is US boomers right on the edge of retirement or otherwise shifting to fixed income… And a normal correction causes all of them to divest simultaneously from equities. There is a potential for a stampede out of US equities.