S&P 500

Discussion of the Stock portion of the Permanent Portfolio

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Kbg
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Re: S&P 500

Post by Kbg » Mon Dec 16, 2019 10:11 pm

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.
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Re: S&P 500

Post by boglerdude » Thu Dec 19, 2019 1:44 am

So you have 100 investors and a stock market with 3 companies. They value company A as worth $1 trillion, B 800 million, and C 200 million. Total market cap 2T.

These investors combined own 50% A, 40% B, 10% C in their portfolio. Some may hold different percentages than others.

These investors are smarter than me so I dont question what they think the companies are worth. But if I do NOT hold 50% A, 40% B, 10% C - is that going against their collective wisdom?
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Kbg
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Re: S&P 500

Post by Kbg » Thu Dec 19, 2019 5:58 pm

You don’t have to buy a cap weighted index, you can buy an equal weighted one, a factor based one, or skip large cap altogether. Why complain when there are so many alternatives?

The method is the method.

Now historically when these huge caps decide to take a nose dive you are going off the board with them, this is a known for anyone who has done their homework. Your alternative options are use something else or try your hand at market timing.
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ochotona
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Re: S&P 500

Post by ochotona » Thu Dec 19, 2019 7:07 pm

FYI...

Equal weight SP500 performs almost exactly like cap weighted Large Cap 45% and Mid Cap 55%

I think that's very interesting.
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Kbg
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Re: S&P 500

Post by Kbg » Thu Dec 19, 2019 9:02 pm

My last post probably sounds like I was dissing on boglerdude which was not my intent, but yeah, equal weight avoids the problem bd pointed out. In a way it IS a problem no doubt...but the flip side is you are also loading up on America's most successful companies. [strike]Large[strike] cap weighted is sorta Darwinian in how it works. And to be redundant, there are worse things you could do with your money. What is amazing to me is not only how narrow the market is but how long this effect has been in place. It's quite incredible really.
Last edited by Kbg on Tue Dec 24, 2019 9:30 am, edited 1 time in total.
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Re: S&P 500

Post by boglerdude » Fri Dec 20, 2019 9:51 pm

the question wasnt answered, is cap weighting what the efficient market recommends? If you buy total market index do you own, for example, 1% of each company in the index? So you dont own "more Apple" than anything else. Apple has more revenue than small companies
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Kbg
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Re: S&P 500

Post by Kbg » Tue Dec 24, 2019 9:35 am

Short answer, yes.

Total Market is still cap weighted it just adds smaller companies. Perhaps someone can correct but I think with total market you get like 20% small to mid caps and the rest is still large cap...which gives you an idea of how big large caps are.
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