The Vanguard S&P 500 ETF Is Unstoppable, but This 1 Investment Could Be Safer Right Now
It's time to start thinking about ways to diversify away from tech concentration while maintaining equity market upside.
Overview
Investing in the S&P 500 has been one of the simplest strategies to produce the best returns over the past decade. And it requires no stock picking. By simply investing in the largest U.S. stocks, investors have captured a roughly 15% average annual return over the past decade.
But that performance comes with an asterisk. Over the past 10 years, the S&P 500 index has grown progressively more concentrated and riskier. As it stands currently, roughly 40% of the Vanguard S&P 500 ETF (NYSEMKT: VOO) is invested in tech stocks. Nearly 40% of index assets are also committed to just the top 10 holdings, including Nvidia, Apple, and Microsoft.
Details
That's as high a concentration in this supposedly diversified index as we've ever seen. Translation: Investors are highly exposed to a sudden or deep correction in tech stocks. That's not to say investors shouldn't continue to use the S&P 500 as the core of their portfolios -- just that they may want to approach it in a different way.
Source
Originally published at www.fool.com.