The NVDA section is a good reality check on how diversification has become in a cap‑weighted world. I still prefer that over a price-weighted cap, though. But yes, the fact that 74 S&P names outperformed it last year, yet the company still drove more of the index’s return than any other? It really makes you see how much of the market story is about the size of a few companies rather than stock‑picking. And that's considering an index with only 500 names.
Thank you for your comment. It’s a strange world we live in these days, where benchmark components drive returns but expose investors to more risk than they understand and appreciate.
Thanks so much for your comment. This passive flow vs over valuation situation is a strange dynamic that will resolve itself eventually. Hopefully in a not so destructive way.
As I like to say, “diversification” is not risk-management.
The NVDA section is a good reality check on how diversification has become in a cap‑weighted world. I still prefer that over a price-weighted cap, though. But yes, the fact that 74 S&P names outperformed it last year, yet the company still drove more of the index’s return than any other? It really makes you see how much of the market story is about the size of a few companies rather than stock‑picking. And that's considering an index with only 500 names.
Thank you for your comment. It’s a strange world we live in these days, where benchmark components drive returns but expose investors to more risk than they understand and appreciate.
And that's considering it's one of the main indexes. It gets wilder out there.
Thanks so much for your comment. This passive flow vs over valuation situation is a strange dynamic that will resolve itself eventually. Hopefully in a not so destructive way.
As I like to say, “diversification” is not risk-management.