Happy February!
I can’t believe how cold and snowy January was and I’m definitely ready for spring, and I imagine many of you are too.
First, thank you for entrusting us with managing your money and, for many of you, guiding your financial planning as well. As we move into February and beyond, I wanted to take a moment to provide some insight into the S&P 500 Index, since most of you own it either with us or within your 401(k) plan.
The S&P 500 Index represents the 500 largest companies in the United States, making it an easy way to invest in the broader stock market. However, owning this fund means you are 100% exposed to stock market risk – there are no bonds or cash holdings, only stocks. While the index can be volatile in the short term, historically, it has been a strong long-term investment.
In recent years, the S&P 500 has become increasingly dominated by the technology sector. Compared to a decade ago, the index is now much more concentrated in just a handful of companies. Currently, the top 8 holdings account for over 35% of the S&P 500:
- Apple (7.6%)
- NVIDIA (6.61%)
- Microsoft (6.29%)
- Amazon (4.12%)
- Google (4.04%)
- Meta (2.56%)
- Tesla (2.26%)
- Broadcom (2.17%)
When adding other technology stocks in the index, the sector makes up nearly 50% of the S&P 500. This increased concentration in tech means the index may be more volatile in the coming years than it has been in the past.
Given this shift, it’s important to evaluate whether your portfolio aligns with your risk tolerance, goals, and expectations. If the high exposure to tech feels too aggressive, now may be a good time to reassess your stock allocation.
Wishing you a successful year of investing!
Spencer Neal, C(k)P, AIF®
2007 Tidewater Colony Drive #2B
Annapolis, MD 21401
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