Your Survival Guy

Preparing your investments and family for when disaster strikes.

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These Stocks Just Crossed an Ominous Threshold: Your Neighbor Probably Owns Them

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You can read here about the late Jack Bogle’s concerns with index funds. Now they’ve crossed an ominous threshold: The market cap of the top five companies in the S&P 500 Index represent 18% of the total index capitalization, higher than at any time on record, including the Tech Bubble. Those companies are Apple, Microsoft, Alphabet (Google), Amazon, and Facebook.

When mutual funds and ETFs have a mandate to buy an index of stocks, like those in the S&P 500, research and analysis go out the door—there’s zero analysis—because the purchases are required. In replicating an index, the largest capitalization stocks come to dominate a portfolio. With the S&P 500, it’s the largest five that play the music—the rest are just groupies.

Before the music stops, perhaps you should seek an approach where stocks are picked according to their individual value.

Twice in this century the S&P 500 has crashed—first by more than 49% when the Tech Bubble burst, and then by more than 56% during the Financial Crisis. Perhaps it’s time for a change.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.