Is the S&P 500 Too Concentrated?

Some have become concerned with the concentration of the S&P 500 amid the dominance of stocks like the "Magnificent 7." We'll dive into how concentrated the index really is in today's video.

DISCLAIMER: This channel is for education purposes only and does not constitute financial advice - Richard is not responsible for investment actions taken by viewers. Please seek out a registered advisor if you require assistance (while Richard is a registered portfolio manager at WDS Investment Management, he does not provide advice through The Plain Bagel, which is not affiliated with his employer).

[ThePlainBagel]

NOTE - In comparing the S&P 500 to other market indices, it's worth highlighting that every other country has a smaller constituent count, so a higher top 10 concentrated would be expected.

While the point I was hoping to communicate was that investing in these international indices would result in less diversification than investing in the S&P 500, this is an important caveat I didn't emphasize in the video. Apologies.

[Danpron]

As an investment enthusiast, I'm intrigued by how top-tier investors manage to become millionaires through their investments. While I have a substantial amount of initial capital, I'm uncertain about the strategies and approaches necessary to achieve returns exceeding $400k, as some have done this season.

[SkinnyNiceGuy]

This is the most dry and straightforward finance channel but I love it. Thank you!

[SlavoPetrovic]

Amazing content! I have been following your videos for sometime now, consistently kicking down Wall Street doors for two years now, I have over $320k in stocks. Currently, my portfolio is down by 15%. Wondering if they're any short term opportunities I can invest in.

[davidparker]

We are all so blessed to have such researched, nuanced, and simple explanations delivered to our front door for free. Thanks ThePlainBagel!

[surface]

I like the plain bagel ❤. You accurately portray just how "boring" stable and reliable investing is. No exaggerated excitement, no " way to make a quick buck", just plain old knowledge.

[lm]

lol, if the s&p 500 crash by 63% it doesn‘t matter in what you are invested at all

[julius]

7:48 well theres also the difference in size. For example the german Inder (DAX) only tracks 40 companies..

[Yorpy]

My investment into the S&P 500 isn't active because I expect it to outperform anything. It's passive because it's "a safe bet" and I'll be in the same boat as everyone else. I don't care if I out-perform anyone; I care if I under-perform everyone.

[TheTwigMaster]

The video’s title question read my mind! Thanks for sharing your thoughts.

[Magic_beans_]

I prefer broader funds like ITOT or VT for the diversification. The S&P had a “lost decade” from 2000-2009, but smaller and foreign companies kept chugging along. Then Europe had a lost decade roughly 2008-2018 and the US was doing well. I couldn’t say what’ll outperform, but the imperfect correlation between market segments can reduce the swings somewhat.

[roddywoods]

What are the best additions to a $500k portfolio to boost performance? S&P 500 is Up and will do better in 2024 I believe as indicators for profits continue to improve, investors like me believe that “Santa has come early” to the markets.

[LoganT]

Canadians now have access to a variety of internationally diversified index ETFs. This can help if you’re concerned with country concentration. It’s a meme at this point but JUST BUY VEQT/XEQT/ZEQT (or one of the bond inclusive varieties).

[lowwastehighmelanin]

I learn SO MUCH from this channel. Thanks, Richard. :)

[Cdix]

As a person who watches your videos on occasion, I was expecting you to state the obvious about the magnificent 7 and agree on the level of concentration. Very impressed you took the time to go a lot deeper than just quoting S&P historical data and actually reviewed alternatives both domestic and internationally. Felt like it gave me a complete understanding. Thank you @theplainbagel

[hundid]

Would have loved to see you bring up the sector weightings when discussing S&P's current multiple in comparison to other stock markets. The S&P has a much higher tech weighting then other global indexes, and then it had historically. Since tech tends to have higher mults this explains a lot. When you look us valuations vs global valuations adjusting by sector, US is not as expensive as the raw CAPE shows.

[Allie-nysp]

Well done. I appreciate your clear sense of ethics.

[Robert-kygl]

Richard is one of maybe three Youtubers that I will 100% click on every single time I see a new video. Keep up the good work!😀

[badarhoeington]

*I had problem comprehending trading in general. I tried watching other YouTube trading channels, but they made the concepts more complicated. I was almost giving up until when i discovered content and explain everything in detail. The videos are easy to follow*

[elbranda]

Distillation of information in a concise and straightforward manner without oversimplifying or feeling the need to use buzzwords (which underlines insecurity I think) should deserve a Nobel Prize category, always a pleasure man..