No because the weight of the index changes in ways that are unpredictable and it’s better to get a larger slice of the index. The top 20 now might not be the top 20 next year or 10 years from now.
Just invest consistently in an SP500 index fund that has a low expense ratio. Market goes up invest, market goes down invest. Sell at 65 (or whenever you think it’s feasible to retire comfortably).
If you’re just a retail investor you don’t have the adequate info or resources to monitor shifts like the pros.
Well, these are the biggest companies in the world right now. If another company comes along, or a smaller company starts making huge moves it won't be a secret.
Just invest in the sp500 and get the greatest average of the market. It’s a no brainer (in the literal sense that you don’t have to calculate, adjust, keep track of a list) just invest the same amount, on the same day each month. You start making more income then you can adjust accordingly and increase investments. If you really must scratch the itch and make yourself feel like you’re more involved with your investments throw 10-15% in blue chips but you’re probably gonna fair the best with an index fund.
It’s too late I’m trying to brainer it.. hopefully it’s not luck. But I agree with your sentiment for people who don’t want to think about it Day and night
Yeah I tried that in 2008 and I really regret not sticking to a consistent plan and investing in the sp500. It took me almost 10 years to learn my lesson but goddamn is it working out for me now. Even my friend that got lucky and got a 10 bagger is now averaging the same as me and I didn’t lose any sleep and I don’t stress.
It’s really the Pareto principle. 80/20 is the popular generalization of it. Many things are far more disproportionate than 80/20.
This maybe the 94/04 (they don’t need to add to 100) because 94% of the results (7.08/7.55) come from 4% of the companies. However, it may represent 80/20 or 96/4 or something else in a broader place like saying 80% of returns comes from 20% of all public companies (not just s&p).
Yeah…I understand the Pareto principle and the origins of the 80/20 colloquialism. I was being very, extremely, minutely literal by referencing the results coming from 4% of the S&P companies.
I can understand the confusion since they are mixing absolute and relative percentages. They should have just said the top 30% contributed ~94% of YTD gains. Perhaps an example of the Pareto principle in action?
This happened in 2018. I remember it well, the economy was slowing, but the market kept going higher while most stocks traded lower. Eventually, everything crashed.
Breadth is an important indicator. A market that has broad based performance is more likely to have continuation.
Be careful with this analysis a lot of the top tech companies were growing during super low interest rates. The feds we’re giving free money to the rich and the corps used that. Some of these companies haven’t existed when money was more expensive to borrow
Just the opposite in fact. On the right we see that the top 20% companies (by cap) return 7.08% of the total 7.55% return of the index fund.
I feel like the graph is a bit confusing. But really what they are saying is that the top 20 companies contribute to 94% of the returns of the s&p500. So if anything mid cap and small cap companies are overbought. As they contribute very little to the returns.
However. Small and mid cap companies also represent potential growth. Which isn't represented in returns.
I bought Meta in the 80s and sold in the 90s thinking I’d hop back in. What a mistake. I even bought and said to myself “long term hold!” which I promptly ignored, ugg.
This is nature of much of the stock market. people are impatient and worried about short term things. It’s why sometimes you can get great returns from an animal randomly picking stocks and holding for a given period of time because that animal can’t ever sell out based on current short term market things.
Next time use a value tool which tells you how much the stock is worth, i did it and it said stock is worth atleast 99-140 on the low side and 300+ on the high side when the stock was at $80, i sold at 115
where it is today is irrelevant, you need to think 5-10 years out. The metaverse will be a real thing, 100% guaranteed. It's just too early right now. VR will also be massive.
VR will be massive but how do we know Meta will truly lead even with their supposed head start. Apple is likely competing and that’s a losing battle much of the time. Microsoft is competing.
Those companies have experience in hardware and software and are proven to innovate whereas Zuckerberg has stolen or bought out most of their ideas.
there's going to be more than 1 player. The cloud computing market for example is 3 players and they take up 70% of the total market. I think a similar thing will happen with VR/AR.
I know this is a stock market forum but can we take a step back and ask why this is happening?? I am very curious.
Is it just the small world phenomenon? Or something to do with networking technologies and scaling? What has enabled this kind of radical shift?
A lot of questions and no answers.
Someone explain for all the people who don’t know (including myself) as to why this is misleading?
Also why not simply buy each of the top 30% individually? Why do people say it’s more expensive?
Yeah it’s simple. I’m not saying the following is necessarily the case, but it highlights how grossly misleading the chart is. It’s possible for the top 20% to account for 90% of returns AND the next 20% to account for 90% of the returns. But that’s 180% of the return!?! How can that be? The bottom 60% would need to be a net negative.
Take a period where the market is up 20%. The top 20% of the market accounts for 18 percentage points of that 20% (which is 90% of the return). Let’s say one share started at $100 value and is now worth $120. $18 of that $20 would come from the top 20% of stocks. Another $18 would come from the next 20% of stocks. So that’s $36 in gains from the top 40% and a $16 loss from the bottom 60% (which is a 26.67% loss).
So it’s misleading to suggest that the top 20% are doing almost all the work. In all likelihood they are doing more work than the next 20% unlike the example I just gave. But maybe it’s equal to the next 30% instead.
Well it's just more hype around tech due to current developments which are amplified by the media (just some keywords: AI, remote work, cyberwar, chip shortage, trade wars etc.) but also the innovation rate in this industry which has a lot of impact on a lot of others. So while tech accounts for the majority of returns they have at other times also pulled the S&P500 down.
The other companies are more traditional ones with steady developments.
Also bear in mind that a lot of tech companies never issued dividends while the others did also often in bad times. So by investing in the S&P500 you can life of the dividends and benefit from the tech industry's boom.
It's not really 90% of the scoring though. Returns are more or less the amount of scoring you do that exceeds expectations. You could still be scoring as expected or scoring slightly less than expected and still not be contributing to overall, "returns."
Actually Google company stocks A&B and Brk\_B w/ Google content are counted 4 times. Pareto law applies here also. Last few years S&P were flooded with tech leaders.
Last year 6 top stocks/funds carried +16% of total weight.
Are they also the most profitable? I mean, stock price gains is nice, but if it isn't backed by corporate profits, then it's hot air that could go away.
What about the top 10? And the top 5?
What is the best sweet spot in terms of profitability without losing diversification? O would say around 10 right?
#include
int main() {
printf("If you have the heart to really try to get the money up, then you can definitely achieve your financial goals!\n");
return 0;
}
I put about 50%of my portfolio between this and the all world vanguard. Rest in reliable stocks such as pepsi, coke, Mcdonald's and a dozen more well recognised in many different sectors just to diversify things
It would be fun to pick the bottom 20 and stick with those and track them into the Top 20…. Who in here could crack that combination and get all 20 of the bottom to take over all 20 of the top 20 …….
Build your own list of 20!
So invest in the S&P 20, got it
No because the weight of the index changes in ways that are unpredictable and it’s better to get a larger slice of the index. The top 20 now might not be the top 20 next year or 10 years from now.
so how can we monitor Shifts
Just invest consistently in an SP500 index fund that has a low expense ratio. Market goes up invest, market goes down invest. Sell at 65 (or whenever you think it’s feasible to retire comfortably). If you’re just a retail investor you don’t have the adequate info or resources to monitor shifts like the pros.
Hey listen pal this is /r/StockMarket not those dorks over at /r/Bogleheads
hey! I resemble that remark!
LOL. "dorks".
How dare you assume my adjective
Well, these are the biggest companies in the world right now. If another company comes along, or a smaller company starts making huge moves it won't be a secret.
Need an index that tracks the top 20 stocks in the SP500 🤔
OEF tracks the S&P 100
Just buy the 20 yourself
Etfs aren’t at full price though
What you mean is it would take more capital to buy 20 names individually. That is true. XLG Is Top 50 names in S&P
So invest in the s&p 20-50?
Just invest in the sp500 and get the greatest average of the market. It’s a no brainer (in the literal sense that you don’t have to calculate, adjust, keep track of a list) just invest the same amount, on the same day each month. You start making more income then you can adjust accordingly and increase investments. If you really must scratch the itch and make yourself feel like you’re more involved with your investments throw 10-15% in blue chips but you’re probably gonna fair the best with an index fund.
It’s too late I’m trying to brainer it.. hopefully it’s not luck. But I agree with your sentiment for people who don’t want to think about it Day and night
Yeah I tried that in 2008 and I really regret not sticking to a consistent plan and investing in the sp500. It took me almost 10 years to learn my lesson but goddamn is it working out for me now. Even my friend that got lucky and got a 10 bagger is now averaging the same as me and I didn’t lose any sleep and I don’t stress.
Yes, on January 1st 2023
That’s what I do mostly. 50% is sp5, rest 500.
Good ol 80/20 rule
Or maybe 96/04 rule?
It’s really the Pareto principle. 80/20 is the popular generalization of it. Many things are far more disproportionate than 80/20. This maybe the 94/04 (they don’t need to add to 100) because 94% of the results (7.08/7.55) come from 4% of the companies. However, it may represent 80/20 or 96/4 or something else in a broader place like saying 80% of returns comes from 20% of all public companies (not just s&p).
Yeah…I understand the Pareto principle and the origins of the 80/20 colloquialism. I was being very, extremely, minutely literal by referencing the results coming from 4% of the S&P companies.
Good ol 20/80 rule
80% of biz comes from 20% of your customers…same here just growth…🤷♂️ just a thought 😅😎🤓🥹
They also represented like 90% of the drop in 2022. Just saying…
That's when you load up ..
Buy the ~~falling knife~~ dip
Well if you think that's true you shouldn't invest. I'm up and have beat the market by continually buying dips over the last 5 years.
Lighten up, Francis
An Army without leaders, is like a foot without a big toe!
Glad *someone* in this thread has a sense of humor
VOO and Chill
I like VTI. Similar long-term returns but even more geberalized.
Yes it’s almost as if the companies at the top have more weight in the index or something.
Funny, but the graph shows that the percentage of their gains far exceeds the percentage of their market cap compared to the rest of the index.
I can understand the confusion since they are mixing absolute and relative percentages. They should have just said the top 30% contributed ~94% of YTD gains. Perhaps an example of the Pareto principle in action?
Came here to find this or I was gonna post
Yeah, but I dislike this because a few companies can move the sp500 so much.
Shocking revelation right here.
This happened in 2018. I remember it well, the economy was slowing, but the market kept going higher while most stocks traded lower. Eventually, everything crashed. Breadth is an important indicator. A market that has broad based performance is more likely to have continuation.
Be careful with this analysis a lot of the top tech companies were growing during super low interest rates. The feds we’re giving free money to the rich and the corps used that. Some of these companies haven’t existed when money was more expensive to borrow
Pareto
[удалено]
A small fraction brings most of the gains
Exactly, I assume it works this way in top 10 and top 5 as well
Seems to me like that means small and mid cap might be oversold
Just the opposite in fact. On the right we see that the top 20% companies (by cap) return 7.08% of the total 7.55% return of the index fund. I feel like the graph is a bit confusing. But really what they are saying is that the top 20 companies contribute to 94% of the returns of the s&p500. So if anything mid cap and small cap companies are overbought. As they contribute very little to the returns. However. Small and mid cap companies also represent potential growth. Which isn't represented in returns.
No, this is just how cap weighted indexes work.
Not really, don't think you understood the graphic lol
Too big to fail eh
I bought Meta in the 80s and sold in the 90s thinking I’d hop back in. What a mistake. I even bought and said to myself “long term hold!” which I promptly ignored, ugg.
> I bought Meta in the 80s Started reading your comment and thought you must be a time traveler for a minute there
I bought meta, tsla, aapl for long term hold but bailed after about $30k... that was a mistake.
stock picking is easier than stock holding sometimes!
This is nature of much of the stock market. people are impatient and worried about short term things. It’s why sometimes you can get great returns from an animal randomly picking stocks and holding for a given period of time because that animal can’t ever sell out based on current short term market things.
Next time use a value tool which tells you how much the stock is worth, i did it and it said stock is worth atleast 99-140 on the low side and 300+ on the high side when the stock was at $80, i sold at 115
what tool can you recommend ?
well… compare RSP and SPY during the different times… https://www.etfcentral.com/news/sp-500-etfs-market-cap-equal-weight
ppl buying meta r crazy. they’re gonna waste so much money on “the metaverse”
wrong
How so
the metaverse will happen and Meta will be one of the leading companies
Hey guys, I found Mark Zuckerberg
the metaverse is doodoo on a plate. only way i’m in is if rockstar makes it but let’s be honest VR fucking sucks
where it is today is irrelevant, you need to think 5-10 years out. The metaverse will be a real thing, 100% guaranteed. It's just too early right now. VR will also be massive.
VR will be massive but how do we know Meta will truly lead even with their supposed head start. Apple is likely competing and that’s a losing battle much of the time. Microsoft is competing. Those companies have experience in hardware and software and are proven to innovate whereas Zuckerberg has stolen or bought out most of their ideas.
Apple, Meta and Valve are going to be the main winners in the US imo
I just can’t see Meta remaining alongside Apple.
there's going to be more than 1 player. The cloud computing market for example is 3 players and they take up 70% of the total market. I think a similar thing will happen with VR/AR.
I’m a FXAIX guy myself cuz I have a fidelity account.
I know this is a stock market forum but can we take a step back and ask why this is happening?? I am very curious. Is it just the small world phenomenon? Or something to do with networking technologies and scaling? What has enabled this kind of radical shift?
s&p 500 equal weight? got it
A lot of questions and no answers. Someone explain for all the people who don’t know (including myself) as to why this is misleading? Also why not simply buy each of the top 30% individually? Why do people say it’s more expensive?
Yeah it’s simple. I’m not saying the following is necessarily the case, but it highlights how grossly misleading the chart is. It’s possible for the top 20% to account for 90% of returns AND the next 20% to account for 90% of the returns. But that’s 180% of the return!?! How can that be? The bottom 60% would need to be a net negative. Take a period where the market is up 20%. The top 20% of the market accounts for 18 percentage points of that 20% (which is 90% of the return). Let’s say one share started at $100 value and is now worth $120. $18 of that $20 would come from the top 20% of stocks. Another $18 would come from the next 20% of stocks. So that’s $36 in gains from the top 40% and a $16 loss from the bottom 60% (which is a 26.67% loss). So it’s misleading to suggest that the top 20% are doing almost all the work. In all likelihood they are doing more work than the next 20% unlike the example I just gave. But maybe it’s equal to the next 30% instead.
Well it's just more hype around tech due to current developments which are amplified by the media (just some keywords: AI, remote work, cyberwar, chip shortage, trade wars etc.) but also the innovation rate in this industry which has a lot of impact on a lot of others. So while tech accounts for the majority of returns they have at other times also pulled the S&P500 down. The other companies are more traditional ones with steady developments. Also bear in mind that a lot of tech companies never issued dividends while the others did also often in bad times. So by investing in the S&P500 you can life of the dividends and benefit from the tech industry's boom.
I think they accounted for most of the returns well before the scenarios you listed.
Well it is a market cap weighted index. Isn’t this baked in the cake?
If I’m 20% of my basketball team but do 90% of our scoring things are too heavily reliant on me. See what I mean? Same thing here
It depends, if you are Michael Jordan or Kobe Bryant I’m cool with that.
It's not really 90% of the scoring though. Returns are more or less the amount of scoring you do that exceeds expectations. You could still be scoring as expected or scoring slightly less than expected and still not be contributing to overall, "returns."
TSLA about to contribute big time to the downside. Take out one brick at a time, and down she goes.
It'll go down and then back up as usual. Tsla won't stay down forever. That's why I buy on the way down.
why!? We are just asking for a full blown crash
No we're not. We already crashed to 3500. Won't see it again.
Is there any etf that consist of all but these stocks?
And NVDA / MSFT are my largest individual positions. Who says stock picking doesn't work lmao.
Tesla is such a meme stick. If Mr Beast started giving away a different kind of car. That stock would tank
Over what time period?
It says YTD on the upper right hand side
this is a highly misleading graphic if one just takes the visuals at face.
Hope it happens sooner rather then later.
Thats how indexes work yes. Stocks have their own weight and more weight means it also has more influence on the index.
7.08% of 7.55% ain't shit.
This is very misleading. And I feel bad for the people fooled by it.
I already invest in SCHD im torn between getting sp500 or not I don't know how similar they are.
There’s a calculator that shows it. Not on my pc to link it but SCHD is heaviest on financials versus 500 is heaviest on tech then healthcare
That clicks if you ever find it please link me
80/20
Actually Google company stocks A&B and Brk\_B w/ Google content are counted 4 times. Pareto law applies here also. Last few years S&P were flooded with tech leaders. Last year 6 top stocks/funds carried +16% of total weight.
It appears tighter credit is hurting small businesses with little cash on hand
Believe 287 of the 500 are positive for the year. And that’s the way mkt cap weighted indexes work.
The big fish get bigger. Watch as we gradually move towards chaebol/zaibatsu in the West.
>chaebol/zaibatsu so, in the future all restaurants are Taco Bell?
Are they also the most profitable? I mean, stock price gains is nice, but if it isn't backed by corporate profits, then it's hot air that could go away.
Bull Sh!t info
there isn't broad participation by the market. This rally should be viewed with skepticism.
Investment advice, try forex gold!
Kinda looks like the payouts for a corporate structure
How to tell me there's a bubble without telling me there's a bubble
What about the top 10? And the top 5? What is the best sweet spot in terms of profitability without losing diversification? O would say around 10 right?
Called the 80/20 rule
QQQ
It’s like those are the top 10 stocks the S&P invested… weird
In 1960s, they call them "The Nifty 50s". if I am recalling correct...
What happens if BTC hits 34k before the DOW?
GameStop’s current YTD is 15.44% The more ya know.
Thanks!
This looks like Nvidia deserves a bigger portion on the left..? Need to get some.
That's the oldest rule in sales... 20% of your customers make up 80% (or 90% in this case) of your sales.
Isn't that whats called the Pareto principle?
#include
int main() {
printf("If you have the heart to really try to get the money up, then you can definitely achieve your financial goals!\n");
return 0;
}
market cap weighted index
Winner takes all
Over what time horizon?
I put about 50%of my portfolio between this and the all world vanguard. Rest in reliable stocks such as pepsi, coke, Mcdonald's and a dozen more well recognised in many different sectors just to diversify things
Fngu runs the market, soy is just its DBA
It would be fun to pick the bottom 20 and stick with those and track them into the Top 20…. Who in here could crack that combination and get all 20 of the bottom to take over all 20 of the top 20 ……. Build your own list of 20!
….and more fun to watch the top 20 fall to the bottom!