The S&P 500 Index has posted exceptional returns for the past two quarters. It turns out that the most striking contributor has been the dominance of the seven largest stocks in the US: the so-called “Magnificent 7”. These companies alone made up 33% of the total value of the S&P 500 as of the end of March. It’s at this point many investors may question the validity of a more diversified approach: why settle for 6% returns when, if you just picked the right stocks, your returns could be much higher? The simple answer is that it’s harder than you might think.
Towards the end of each year, it is common to see financial forecasts being issued for the year ahead. Market analysts and financial pundits put forth estimates of where the market will end the year and how the economy will perform.
For most of us, our lives generally follow a predictable path. If we are lucky, we enjoy good health as we age, and those years can be truly wonderful. However, there may come a time when illness or injury disrupts this trajectory. While some may experience only a brief setback, others may endure the lingering effects for years.
Sometimes it can be difficult to remain a disciplined investor. Over periods of time, a diversified buy-hold-rebalance strategy can seem like it is not performing as well as it should, especially when we see some other “hot investment” making headlines. It can lead us to wonder if we may be missing out on some new and lucrative investment trend.