When investors think ofindices and passive investing, diversification immediately comes to mind. However, as seen by the chart below providedby Charles Schwab & Company, presently, the top 10 stocks in the S&P500 now represent an astounding 40% of the index, up from roughly 18% in2014. Furthermore, 53.32% of the S&P500 is now composed “sensitive” sectors which include Communication Services,Energy, Industrials and Technology (which alone is 33.16% of the index). This is hardly adequate diversification whenbuilding a portfolio suitable for Growth w/ reasonable distributions.
During the “accumulation” phase of life, where you have overa decade until you retire, the S&P 500 is an appropriate benchmark. However, when you are in the “assetpreservation” phase of your life, AKA retirement or near retirement, it isimportant to diversify. We are wellaware of the tradeoff between performance and the desire for reducedvolatility. Investors must keep in mindthat for many, the goal of your portfolio at this point in your “financial”life is to help maintain your standard of living without causing you to leasesleep at night during periods of market stress. One of the biggest challenges to investing is not doing the wrong thingat the wrong time.
“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”
