Or maybe people need to recognize that market cap weighting can at times result in nondiversification and the potential consequences of that (which apply to index funds just as they do to active funds), so they are not taken by surprise that such a thing could ever happen.Maybe regulatory definition of diversification needs changing to account for market weighting.
If I said that 20% of my equity portfolio consisted of 3 individual stocks, BHdom would be all over telling me how I should diversify into a total market or S&P 500 index fund to mitigate idiosyncratic risk and be sure to limit my "fun money" to 5% of my port. But that's the reality of the current composition of the S&P 500 index - 20% of it is in 3 companies.
Edit: And the folks in VGT... 46% in 3 companies. Three (3). Nearly half of the fund (an index fund) is in 3 companies. That's bonkers.
Statistics: Posted by Beensabu — Sun Jul 07, 2024 10:44 pm