{"id":6519,"date":"2020-07-09T10:24:26","date_gmt":"2020-07-09T15:24:26","guid":{"rendered":"https:\/\/schenkelberg.investments\/?p=6519"},"modified":"2020-07-09T10:24:36","modified_gmt":"2020-07-09T15:24:36","slug":"superstars-of-the-indices","status":"publish","type":"post","link":"https:\/\/schenkelberg.investments\/?p=6519","title":{"rendered":"Superstars of the Indices"},"content":{"rendered":"\n

Diversification is a key piece of a portfolio that is looking to control risk. Investopedia describes diversification as follows: \u201cA diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt at limiting exposure to any single asset or risk. The rationale behind this technique is that a portfolio constructed of different kinds of assets will, on average, yield higher long-term returns and lower the risk of any individual holding or security.\u201d\u00a0 How diversified are many of our major investment indices?<\/p>\n\n\n\n

iShares MSCI ACWI ETF tracks a market-cap-weighted index of\nlarge and midcap global stocks, covering 85% of the developed and emerging\nmarkets capitalization. Market capitalization is a measure of the size of a\nstock. The global index ETF has 2,266 holdings. Three stocks make up more than 8.5%\nof the index: Apple, Microsoft Corporation and Amazon. All other stocks make up\n0.04% of the remaining portion, on average. It may be said that diversification\nis not as strong as one might think.<\/p>\n\n\n\n

Major news networks commonly display stock market\nperformance for three major indices: The Standard & Poor\u2019s 500 Index, Dow\nJones Industrial Average and NASDAQ. These indices all primarily represent\nlarge companies in the United States. They are very similar in many respects. <\/p>\n\n\n\n

All of these indices are \u201cmarket cap weighted.\u201d This means\nthat each stock in the index represents a portion of ownership in relation to\nthe size of the company. In other words, larger companies contribute more to the\nperformance of the index than smaller components. Over the past 10 years much\nhas been written about the large influence of specific technology stocks on the\nperformance of these weighted indices. This phenomenon is alive and well today.\nIt is important to recognize the impact of these large technology companies on\nthe performance of these common indices. <\/p>\n\n\n\n

Year-to-Date through July 7, 2020, Amazon, Microsoft and\nApple have dominated market performance, up 62%, 33% and 28% respectively. It\nstands to reason that these technology stocks have done well in the face of the\nCOVID-19 epidemic, as we all leaned on technology more than ever during this\ntime of remote learning, work and shopping. Conversely, the S&P 500 index\nis down 2.55% through July 7, 2020. This means that the other 504 stocks that\nmake up the index have not performed nearly as well as these three specific\nstocks.<\/p>\n\n\n\n

In some ways, it seems that the stock market as indicated\nby the S&P 500 may be ahead of itself, having almost recovered to past\nhighs after a sharp and quick bear market. However, as we peal back the layers,\nwe realize that not all areas have recovered the same. While some areas, such\nas technology, have reaped the benefits of quarantine, other areas have not\nfared as well. <\/p>\n\n\n\n

There may be some volatility yet to come in S&P 500\nperformance as we move into election season. However, despite index performance\nthat may seem ahead of actual economic data, I believe this lack of diversified\nperformance indicates that we may be able to see a less wild ride with the\noverall index. Significant swings within the sectors that make up the index, however,\nare likely. <\/p>\n\n\n\n

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Diversification is a key piece of a portfolio that is looking to control risk. Investopedia describes diversification as follows: \u201cA diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt at limiting exposure to any single asset or risk. The rationale behind this technique is that a portfolio constructed of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"","_et_gb_content_width":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[119,123],"tags":[],"class_list":["post-6519","post","type-post","status-publish","format-standard","hentry","category-market-commentary","category-market-performance"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p7kXxe-1H9","jetpack-related-posts":[{"id":6218,"url":"https:\/\/schenkelberg.investments\/?p=6218","url_meta":{"origin":6519,"position":0},"title":"Market Update. Divergence from Diversification?","author":"J.J. Schenkelberg, CFA","date":"October 9, 2018","format":false,"excerpt":"Whether you are in the investment industry or not, one of the first lessons everyone learns is the importance of diversification. \u201cDon\u2019t put all your eggs in one basket,\u201d so to speak. Over time we have learned that diversification works. Stocks that are not alike will not perform alike, so\u2026","rel":"","context":"In "Financial Planning"","block_context":{"text":"Financial Planning","link":"https:\/\/schenkelberg.investments\/?cat=122"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6578,"url":"https:\/\/schenkelberg.investments\/?p=6578","url_meta":{"origin":6519,"position":1},"title":"S&P 500 Leaders – What Drives S&P 500 Index Performance","author":"J.J. Schenkelberg, CFA","date":"October 15, 2021","format":false,"excerpt":"When investors turn to market newsmakers they are often given S&P 500 index performance as a proxy for how the stock market has performed for the day, week, month, year. What they don\u2019t readily publicize is how many other thousands of stocks are in the investment market and how these\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2021\/10\/SP-top-ten.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2021\/10\/SP-top-ten.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2021\/10\/SP-top-ten.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":6792,"url":"https:\/\/schenkelberg.investments\/?p=6792","url_meta":{"origin":6519,"position":2},"title":"Same Story on Repeat. Once Again The S&P 500 Index Leads in 2024","author":"J.J. Schenkelberg, CFA","date":"January 9, 2025","format":false,"excerpt":"In 2017 Warren Buffett is quoted as saying,\u201cConsistently buy an S&P 500 low-cost index fund.\u00a0 Keep buying it through thick and thin and especially through thin.\u201d This advice has certainly been extremely lucrative since 2017. I would go so far as to say the S&P 500 is currently in a\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2025\/01\/image-1.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2025\/01\/image-1.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2025\/01\/image-1.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2025\/01\/image-1.png?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2025\/01\/image-1.png?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":6503,"url":"https:\/\/schenkelberg.investments\/?p=6503","url_meta":{"origin":6519,"position":3},"title":"Hindsight is 20\/20","author":"J.J. Schenkelberg, CFA","date":"January 14, 2020","format":false,"excerpt":"Wow, what a year! Not much to complain about when it comes to investment returns for 2019. All major diversified stock indices advanced over 20%. The Standard and Poor\u2019s 500 Index led the way with a 29.7% total return. Technology stocks were the clear winners once again, with iShares S&P\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6571,"url":"https:\/\/schenkelberg.investments\/?p=6571","url_meta":{"origin":6519,"position":4},"title":"Market Update – Third Quarter 2021","author":"J.J. Schenkelberg, CFA","date":"October 15, 2021","format":false,"excerpt":"U.S. Versus International The S&P 500, an index of large U.S. companies, posted a total return of 0.6% for the Third Quarter of 2021. S&P 500 performance was driven by strength in select stocks with large weights in the index. U.S. stocks outperformed international again for the quarter as measured\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6687,"url":"https:\/\/schenkelberg.investments\/?p=6687","url_meta":{"origin":6519,"position":5},"title":"International Stocks Turn To Shine","author":"J.J. Schenkelberg, CFA","date":"April 10, 2023","format":false,"excerpt":"It may not feel like it, but stocks have made a strong comeback since the end of the third quarter of 2022. Despite issues with Silicon Valley Bank and other news items that have roiled the front pages the past couple months, stocks continued to recover nicely from the drop\u2026","rel":"","context":"In "Market Commentary"","block_context":{"text":"Market Commentary","link":"https:\/\/schenkelberg.investments\/?cat=119"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/schenkelberg.investments\/wp-content\/uploads\/2023\/04\/image-3.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]}],"_links":{"self":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6519","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6519"}],"version-history":[{"count":1,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6519\/revisions"}],"predecessor-version":[{"id":6522,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=\/wp\/v2\/posts\/6519\/revisions\/6522"}],"wp:attachment":[{"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6519"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6519"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/schenkelberg.investments\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6519"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}