4 ms·

I guess the story here is more like If you take the Top 500 companies as an indicator how well your economy is doing, but everything is carried on the shoulder

• kasey_junk 10mo ago
  The problem with that approach is you miss out on the gains of tracking a company from when its market cap is small to when it is large, and only capture the opposite as it leaves the top 10. This is one reason people are so concerned with companies going public later. If they just appear in their fully formed embodiments then you can only capture their growth after they are large and their death.
• cromka 10mo ago
  How about S&PMedian? Wonder how this would do over the time.
  • blensor 10mo ago
    Interesting idea, even average would probably already work, it would give high performers some impact but not as much as now. But it kinda misses what the S&P is in my pov. An index tracking how the value of those companies developed over the years measures by what you would have now if you would have invested in each of them
  • barchar 10mo ago
    Probably not well. You'll be consistently betting against the market with very little reason to believe you're really adding information. Also, cap weighting reduces your need to trade and thus your overhead and tax costs.
• barchar 10mo ago
  Them not agreeing isn't a bug. I bet it's pretty historically normal.
• rainsford 10mo ago
  > If you take the Top 500 companies as an indicator how well your economy is doing, but everything is carried on the shoulders of only 1.4% of those 500 companies then what is the point of looking at the 500 companies in the first place. It's valid to argue that success of companies in the S&P 500 is not evenly distributed, but if you really want to understand the impact of that distribution on the economy you have to look at the value of each company rather than treating them equally. The top 7 companies might only be 1.4% of the companies in the S&P 500, but they represent roughly 35% of the market cap of companies in the index. Because of that, they have an impact on the broader economy much larger than the raw number of companies would suggest. "Just" Nvidia doing well is going to have a much larger economic impact than just Newell Brands, which I have never heard of but is apparently one of the smallest on the index. In fact Nvidia's market cap is roughly 1000 that of Newell Brands with presumably similarly disproportionate economic impact.
• creer 10mo ago
  > Make an S&P10 then instead How do you pick these 10? After the fact, necessarily. So then meaningless for tracking the economy.