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Re: S&P 500

Posted: Sun Nov 24, 2019 5:33 pm
by dualstow
mathjak107 wrote:
Sun Nov 24, 2019 5:31 pm
The problem with individual stocks is you not only have to know all about the company you bought but you better know what the competition has on their drawing board
Which is of course impossible to know.

Re: S&P 500

Posted: Sun Nov 24, 2019 6:31 pm
by mathjak107
Exactly .....so individual stocks take on a whole other level of risk that broad based funds don’t have ...individual company risk is a biggie

Re: S&P 500

Posted: Thu Dec 12, 2019 2:20 am
by Smith1776
What really strikes me as interesting is how many different schools of thought there really are in investing.

The efficient market guys; the value investing guys; the factor tilters; the stock pickers; they talk past each other almost as if they're speaking a totally different language.

A basic disagreement on the realities of how the market functions -- the axioms, if you will -- lead to these totally different world views on how to deploy your capital.

Re: S&P 500

Posted: Thu Dec 12, 2019 6:31 am
by dualstow
And even individuals change style. A value guy becomes a factor guy.

Re: S&P 500

Posted: Thu Dec 12, 2019 2:00 pm
by Smith1776
I have definitely become a factor guy myself.

A switch from the Benjamin Graham value approach is also partially what prompted me to leave the field of finance entirely.

I did the CFA Level 1 exam and was SO disillusioned by how much the material contradicted itself.

1) The material preaches efficient market theory
2) Almost all of rest of the material teaches you how to do fundamental analysis

So basically the material is teaching you how to do the thing that even the CFA society itself says has a low chance of success. What's the point, then?

Re: S&P 500

Posted: Sat Dec 14, 2019 6:20 pm
by ochotona
@TN tweeted: "S&P 500 is very top heavy again: top five stocks (Apple, Microsoft, Google, Facebook & Amazon) at 16.5% - the most weight since 1999"

Anything but market cap weighted... equal-weight, dividend payers... anything but FAMAG... what a trap

Re: S&P 500

Posted: Sun Dec 15, 2019 9:24 am
by sophie
ochotona wrote:
Sat Dec 14, 2019 6:20 pm
@TN tweeted: "S&P 500 is very top heavy again: top five stocks (Apple, Microsoft, Google, Facebook & Amazon) at 16.5% - the most weight since 1999"

Anything but market cap weighted... equal-weight, dividend payers... anything but FAMAG... what a trap
Interesting how those are all tech stocks. So there's not only a concentration of a few stocks, but also in that one sector.

This makes me glad I started adding a set of individual stocks to complement my index fund holdings. I avoided the tech sector for exactly the above reason, and picked blue chips or solid companies spread around the other sectors.

Re: S&P 500

Posted: Sun Dec 15, 2019 12:59 pm
by Smith1776
sophie wrote:
Sun Dec 15, 2019 9:24 am
ochotona wrote:
Sat Dec 14, 2019 6:20 pm
@TN tweeted: "S&P 500 is very top heavy again: top five stocks (Apple, Microsoft, Google, Facebook & Amazon) at 16.5% - the most weight since 1999"

Anything but market cap weighted... equal-weight, dividend payers... anything but FAMAG... what a trap
Interesting how those are all tech stocks. So there's not only a concentration of a few stocks, but also in that one sector.

This makes me glad I started adding a set of individual stocks to complement my index fund holdings. I avoided the tech sector for exactly the above reason, and picked blue chips or solid companies spread around the other sectors.
I, too, am also glad I have some diversification away from TSM upon hearing this.

This concentration in the S&P was rather obvious in retrospect, but I didn't realize this myself.

Re: S&P 500

Posted: Mon Dec 16, 2019 2:20 am
by boglerdude
And those tech stocks will outperform because of your pessimism, just like Facebook has since IPO. The Wall of Worry!

Re: S&P 500

Posted: Mon Dec 16, 2019 7:53 am
by sophie
boglerdude wrote:
Mon Dec 16, 2019 2:20 am
And those tech stocks will outperform because of your pessimism, just like Facebook has since IPO. The Wall of Worry!
Of course they will, until they won't.

I still have some PTSD from the advisor who put my Roth IRA 100% into tech stocks in 1999/2000. You can guess what happened after that. It went from ~$100K to about $12K. Not saying history is going to repeat itself, but that was an expensive lesson in avoiding stock concentration in any form. (Also in trusting advisors to make investment choices - I was young and dumb at the time.)

Although I should point out, the portion of the S&P 500 we're talking about here is only 16%. A 2000-style tech crash would not cause anything like my experience above.

Re: S&P 500

Posted: Mon Dec 16, 2019 9:09 am
by vnatale
sophie wrote:
Mon Dec 16, 2019 7:53 am
boglerdude wrote:
Mon Dec 16, 2019 2:20 am
And those tech stocks will outperform because of your pessimism, just like Facebook has since IPO. The Wall of Worry!
Of course they will, until they won't.

I still have some PTSD from the advisor who put my Roth IRA 100% into tech stocks in 1999/2000. You can guess what happened after that. It went from ~$100K to about $12K. Not saying history is going to repeat itself, but that was an expensive lesson in avoiding stock concentration in any form. (Also in trusting advisors to make investment choices - I was young and dumb at the time.)

Although I should point out, the portion of the S&P 500 we're talking about here is only 16%. A 2000-style tech crash would not cause anything like my experience above.
Misery loves company? I had one IRA that I'd invested all in the Janus Mercury Fund 1998. I am almost certain that it was high technology stock concentrated. I'd invested $30,000 and at its peak it hit $130,000. In January 2003, I sold it all for $25,000.

Vinny

Re: S&P 500

Posted: Mon Dec 16, 2019 10:11 pm
by Kbg
Cap weighted is momentum is disguise, period. However, you are also loading up on the index’s/country’s most successful businesses. There are worse things you could do.