Chart No. 206
Equities
7 min read
Free
Ten stocks are now 38% of the index. What it costs you.
Index investing used to mean owning the market. Today it mostly means owning ten companies, and paying their multiple.
Aiko Mendel
Contributor
Illustrative data based on public sources.
SPX · Top 10 weight
The ten largest companies in the S&P 500 now make up 38% of the index. In 2000, at the peak of the last bubble, the figure was 27%.
What you are really buying
An index fund used to be a way to own the economy. Today, more than a third of every dollar you put in goes to ten companies, most of them in technology, most of them valued at more than 30 times earnings.
What it costs
Concentration is not a problem while the leaders keep growing. It becomes one if they stop, because there is no other part of the index big enough to make up the difference. An equal-weighted index has lagged by 4% a year over five years. Over twenty years, it has led.
Not investment advice. Carry writes about markets; it does not tell you what to buy or sell. Charts use illustrative data unless a source says otherwise.
