The five largest S&P 500 companies – Apple, Microsoft, Alphabet (Google), Amazon and Facebook – now make up an astounding 18% of the total index, the highest percentage in history. The first four of these companies are now worth over $1 Trillion apiece, as of early February 2020.
As long as these top five stocks keep rising, investors will do well. However, trees do not grow to the sky, and at some point these technology companies will hit a rough patch. We at Ogorek Wealth Management have taken considerable steps to diversify portfolios should this occur, adding positions in areas outside of technology (such as health care and financials). As the chart below shows, buying the S&P 500 alone may not offer the diversification you would expect.