VTV - SPY: 2 Options To Balance Out A Highly Concentrated Index

2024-05-31 13:14:40 ET

Summary

• The S&P 500 index is nearing record levels of concentration as the technology sector reached one third of the index.
• The concentration is driven by the performance of the "Magnificent Seven" stocks, which have delivered extraordinary earnings growth and trade at expanded multiples.
• Investors concerned about the concentration risk can consider two options: investing in an equal-weight ETF or adding a value-focused ETF to their portfolio.
• We discuss historical sector concentration of the S&P 500 and key risk factors for SPY investors.

The S&P 500 ( SPY ) remains the top dog of equity indices for the average investor. Hailed as one of the greatest money-making machines , the 500 largest public companies by market capitalization make up a force to be reckoned with in equity investing. Consistent outperformance of other equity categories has historically crowned the large capitalization index as king....

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