Five Biggest Stocks Are 23% of S&P 500 Market Cap

Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by Tsiklon on Monday November 30, 2020 @09:52AM (#25254284)

I have no knowledge in this field whatsoever, but is this more an indication that we shouldn't be using the S&P 500 and similar indices as an overall indicator of the performance of the economy, is there value in looking at these indices absent of Big Tech?

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Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by andrewmcwatters on Monday November 30, 2020 @10:00AM (#25254384)

There is an S&P 500 Equal Weight Index, but it makes essentially no difference.

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Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by Tsiklon on Monday November 30, 2020 @10:05AM (#25254454)

Equal Weight index from what I've just read about it apparently treats each company in the index equally - as in 1/500th of the total index's value.

What I was more thinking of is that the S&P 500 is top heavy with Big Tech stocks, is it better to look an index absent of the Big Tech stocks?

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Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by llampx on Tuesday December 01, 2020 @04:54PM (#25270491)

An index absent of the big tech stocks would be the Russell 2000 or IWM.

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Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by andrewmcwatters on Monday November 30, 2020 @10:16AM (#25254578)

No.

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Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by smabie on Monday November 30, 2020 @12:55PM (#25256680)

correlation between all stocks in the S&P 500 is so high that removing big tech makes little difference.

Also, a major part of the problem in my view is the blind indexing of equities that most investors use for the bulk of their portfolio. Market cap weighting essentially results in what essentially a momentum overlay: new money is allocated disproportionately to the stocks with the highest market cap, resulting in those stocks going up even more.

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Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by ac29 on Monday November 30, 2020 @05:18PM (#25259766)

> Market cap weighting essentially results in what essentially a momentum overlay: new money is allocated disproportionately to the stocks with the highest market cap, resulting in those stocks going up even more

New money is allocated exactly proportionally to a stock's market cap in a cap-weighted index fund, by definition. New money into such funds can't disproportionally increase the price of one stock in the index versus another.

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Re:Five Biggest Stocks Are 23% of S&P 500 Market Cap by smabie on Monday November 30, 2020 @08:10PM (#25261099)

Sorry, I phrased that incorrectly/poorly. What I meant to say is that market cap weighting allocates more money to stocks that have a higher market cap (and the stocks got that way by going up in the past), pushing up the price even more.

This wouldn't be true if all shares of a company were all trading at the same time, but that's not the case. The number of available shares is more constrained than the total free floating market cap would suggest.

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