January 27, nvidia (NASDAQ: NVDA) It decreased by 17 % and erased more than $ 590 billion from the market capitalization. It marked the largest day of market caps for companies in the history of the US stock market.
on the other hand Growth inventory The next day, almost half of these losses have recovered, but there are still lessons to learn from this historic market event.
Let’s explain the importance of sale, the risk of exposing, and how the portfolio can be placed according to this risk.
Despite the large drawdown of NVIDIA Broadcom (NASDAQ: AVGO),, Taiwanese semiconductAnd other chipstock and Monday sale were quite isolated.
The next chart shows the maximum of 12 S & P 500 (SNPINDEX: ^GSPC) Components with market capitalization. Taiwan Semiconductors are cut from the upper limit of the market, but are excluded from the chart because they are not in the S & P 500 indexes.
As you can see, I like high -tech companies apple and Meta Enjoyed solid profits as leaders in other industries prefer Wal -Mart and Berkshireha Saway。 actual, Dow Jones Industrial Average (DJINDICES: ^DJI) That day I got 0.7 %. nevertheless, Invesco QQQ Trust (NASDAQ: QQQ)The exchange sales fund (ETF), which tracks NASDAQ-100, has decreased by 2.9 %. VANGUARD S & P 500 ETF (NYSEMKT: Voo) Similarly, S & P 500 was tracked and decreased by 1.4 %.
Needless to say, many individual high-tech stocks, despite the interests of multiple stock market sector, the S & P 500 and Nasdaq-100 are still rapidly decreasing due to how value the chip shares like NVIDIA are. did.
By applying stock prices on the weight of the portfolio, the individual stock can determine the impact on indexes (or the ETF that tracks it).
For example, NVIDIA accounts for about 7.5 % of INVESCO QQQ and 6.6 % of Vanguard S & P 500 ETF. On the other hand, Broadcom expresses 4.0 % and 2.2 % of these two ETFs. Given the two -digit one -day loss on January 27, these two companies defeated 2.0 % of Invesco QQQ 2.0 % while lowering Vanguard S & P 500 by 1.5 %. In other words, only two mega cup stocks accounted for most of these funds.
Selling at NVIDIA and Broadcom shows the risk of the top heavy market. This realization reminds us of the importance of knowing the configuration of index funds, such as benchmarks such as S & P 500 and NASDAQ-100. However, there is a way to counter intensive risk.
The best way is to know what you own and why you own it. That means having a clear investment paper in all stocks or funds in the portfolio.
Another exercise to be considered is to calculate the true exposure of each owned stock beyond portfolio and fund. For example, if you own $ 3,500 in NVIDIA shares but have $ 100,000 in the S & P 500 index fund, the true exposure to NVIDIA will make such a large amount of indexes. It is over.
In many cases, investors assume that indexes or ETFs are diversified only because they contain dozens or hundreds of companies, but diversification varies.
The concentration of S & P 500 is the risk you need to recognize, but that doesn’t mean you should overhaul your whole investment strategy.
The advantage of high -tech in S & P 500 is mainly promoted by the growth of revenue. NVIDIA is a good example because the profits of stock prices are backed up. Profit and margin expansion From the basic business.
In short, S & P 500 is still a powerful tool to worsen wealth for a long time, but investors need to carry out portfoli -reviews so that they are not excessively exposed to a small number of companies and themes.
Consider this before purchasing stocks at NVIDIA.
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JPMorgan Chase is an advertiser for Motley Fool Money. SUZANNE FREY, an executive of Alphabet, is a member of the Motley Fool’s Board of Directors. John Mackey, a former CEO of Amazon subsidiary WHOLE FOODS MARKET, is a member of the Motley Fool’s Board of Directors. Randi Zuckerberg, a former director of market development, Facebook spokeswoman, and sister of Mark Zuckerberg, the CEO of Meta Platform, is a member of the Motley Fool’s Board of Directors. Daniel Folver There is no position in any of the mentioned inventory. Motley fools are Alphabet, Amazon, Apple, Berkshire Hathaway, JPMORGAN CHASE, Meta Platforms, NVIDIA, TAIWAN SEMICONDUCTOR We recommend SLA, Vanguard S & P 500 ETF, and Walmart. Motley Fool recommends Broadcom and recommends the following options: A 395 -dollar call at Microsoft in Microsoft in January 2026 and a $ 405 call at the short -term Microsoft in January 2026. For Motley fools Disclosure policy。
NVIDIA’s 17 % of the plunge has exposed one of the biggest risks in the stock market. Originally published by The Motley Fool
