The recent update on index concentration highlights the importance of evaluating the technology sector weighting in the S&P 500 Index compared to one’s total portfolio. Currently, the technology sector makes up approximately 31.5% of the index, but excluding certain technology-related stocks moved out of the sector in September 2018, the weighting increases to 41.2%. This shift in sector composition could impact overall portfolio performance, especially as other sectors such as financial stocks have outperformed technology stocks in recent quarters. While concentration in a specific sector can lead to strong returns, rotation to other sectors can potentially come at the expense of the previous sector’s performance. Investors are advised to monitor sector weightings in their portfolios and consider diversification to mitigate risk and optimize returns.
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