Are Alternative-Weighted Indexes Safer Than the S&P?
Their exposure to smaller, value-oriented stocks brings different risks.
The S&P 500 is becoming more concentrated. John Rekenthaler illustrates this by comparing the sum of top 10 holding weights over the past 35 years. As of Oct. 15, the top 10 holdings (six of which are tech) combined account for 28% of the S&P 500. That is higher even than the 26% from the late 1990s tech bubble.
The S&P 500 recovered from pre-coronavirus-pandemic levels on Aug. 6, and tech stocks helped drive the recovery. Morningstar’s Ian Tam shows how by the bear market’s end, tech stocks added an additional 6% of positive return to the U.S. stock market.
Sachin Nagarajan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.