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Plain-Vanilla S&P 500 Index Funds Are Out. Here’s What In. (Barrons)

hank
edited January 29 in Fund Discussions
”Much of last year’s 26% gain in the SPDR S&P 500 exchange-traded fund was due to the stellar performance of the Magnificent Seven —the mostly tech-stock behemoths that are the index’s biggest holdings. … Equal-weight strategies take a democratic view of the market, giving equal weight to each component. Reshuffling the S&P 500 that way relegates each company to a 0.2% slice of the index, tilting it to value-oriented and mid-to-smaller-cap stocks and away from large-cap growth.”

Excerpt from Barron’s / January 29

Article by Debbie Carlson

Barron’s - Current Issue (Subscription may be required, but give link a try.)

Comments

  • MarkMark
    ”Much of last year’s 26% gain in the SPDR S&P 500 exchange-traded fund was due to the stellar performance of the Magnificent Seven —the mostly tech-stock behemoths that are the index’s biggest holdings. … " (taken from @hank post above)

    That concerns me as well at this time inasmuch as 30% of the S&P's valuation is in just those 7 stocks. Seems nuts! Or at least due for a correction at some point but I don't know when.

    Anyway it has caused me to look at other stocks outside those 7 and in the past 2 weeks I have picked up shares of some out-of-favor blue chips that have been hard-kicked to the curb recently (ADM, MMM & PFE). They will remain on short leashes for the foreseeable future.

    Otherwise I continue to look for opportunities in different ETF's I currently own. All seem to be hanging around their 52-wk highs and I'm not confident enough to think that they will continue to go higher.
  • Art
    I have 18% of portfolio in 7 stocks. They are PH,GD,NVDA,AVGO,ORLY and COST. My magnificent seven.
  • yogibearbullyogibearbull
    Look at equal-weight funds - SP500 RSP, tech RSPT, energy RSPG, Nasdaq 100 QQEW, etc.

    There are equal-weight versions of most sector ETFs.
    https://ybbpersonalfinance.proboards.com/post/1097/thread
  • Sven
    edited January 30
    Is today’s market rational and so relies on the Magnificent Seven stocks ? Equal weight RSP, lagged S&P 500 by a wide margin last several years. Will the tide turn this year but I hope so?

    @Art, NDNA NVDA, NVIDIA is one of the Magnificent Seven stock. At least you did not pick TSLA.
  • rforno
    edited January 30
    MAGS is an ETF holding only those names, btw....decent volume, too. Kinda equal-weighty but it's hard with these names.
  • MarkMark
    @Sven - I think that you meant NVDA in your response to Art
  • Sven
    @Mark, thank you. I corrected my post.
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