The Magnificent 7 Mirage: Why It Might Be Time To Rethink Your S&P 500 Index Fund

Benzinga_recent_news09-30

The S&P 500 was created in 1957 to track the performance of America’s 500 largest companies, offering investors broad exposure to the U.S. economy. But somewhere along the way, it slowly transformed ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2571331077?lang=en_US&edition=fundamental","thumbnail":"https://cdn.benzinga.com/files/images/story/2025/09/30/SP-500-1-1.jpeg?optimize=medium&dpr=2&auto=webp&width=240","is_english":true,"pubTime":"2025-09-30 17:16","share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","id":"2571331077","market":"us","top_or_hot":-1,"title":"The Magnificent 7 Mirage: Why It Might Be Time To Rethink Your S&P 500 Index Fund","media":"Benzinga_recent_news","content":"<div>\n<p>The S&P 500 was created in 1957 to track the performance of America’s 500 largest companies, offering investors broad exposure to the U.S. economy. But somewhere along the way, it slowly transformed ...</p>\n\n<a href=\"https://www.benzinga.com/Opinion/25/09/47935828/the-magnificent-seven-mirage-why-it-might-be-time-to-rethink-your-s-and-p-500-index-fund\">Source Link</a>\n\n</div>\n","source":"benzinga_recent_news","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The Magnificent 7 Mirage: Why It Might Be Time To Rethink Your S&P 500 Index Fund</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe Magnificent 7 Mirage: Why It Might Be Time To Rethink Your S&P 500 Index Fund\n</h2>\n\n<h4 class=\"meta\">\n\n\n2025-09-30 17:16 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.benzinga.com/Opinion/25/09/47935828/the-magnificent-seven-mirage-why-it-might-be-time-to-rethink-your-s-and-p-500-index-fund><strong>Benzinga_recent_news</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The S&P 500 was created in 1957 to track the performance of America’s 500 largest companies, offering investors broad exposure to the U.S. economy. But somewhere along the way, it slowly transformed ...</p>\n\n<a href=\"https://www.benzinga.com/Opinion/25/09/47935828/the-magnificent-seven-mirage-why-it-might-be-time-to-rethink-your-s-and-p-500-index-fund\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU1221951046.USD","symbol_name":"NORDEA 1 STABLE RETURN \"HM\" (USDHDG) INC","start_time":0,"source_url":"https://www.benzinga.com/Opinion/25/09/47935828/the-magnificent-seven-mirage-why-it-might-be-time-to-rethink-your-s-and-p-500-index-fund","article_id":"2571331077","we_media_id":null,"thumbnails":["https://cdn.benzinga.com/files/images/story/2025/09/30/SP-500-1-1.jpeg?optimize=medium&dpr=2&auto=webp&width=240"],"rights":{"source":"benzinga_recent_news","url":"https://www.benzinga.com/Opinion/25/09/47935828/the-magnificent-seven-mirage-why-it-might-be-time-to-rethink-your-s-and-p-500-index-fund","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2571331077","pubTimestamp":1759223760,"columns":[],"sourceInfo":{"source_id":"benzinga_recent_news","name":"Benzinga"},"weMediaInfo":null,"summary":"- and","collect":0,"end_time":0,"defaultTopTitle":"benzinga.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU1221951046.USD":"NORDEA 1 STABLE RETURN \"HM\" (USDHDG) INC","LU1974910355.USD":"Allianz Thematica Cl AMg DIS USD","MACW.SI":"APPLE 3xLongSG261006","SPY":"标普500ETF","LU0823434583.USD":"BNP PARIBAS US GROWTH \"C\" (USD) ACC","SNVD.UK":"LS -1X NVIDIA","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU2125154935.USD":"ALLSPRING (LUX) WF GLOBAL EQUITY ENHANCED INCOME \"I\" (USD) INC","BK4504":"桥水持仓","NVDD":"1倍做空NVDA ETF-Direxion","BK4579":"人工智能","NVD2.UK":"2X NVIDIA ETP","CAPE":"Shiller CAPE U.S. Equities ETF","SDS":"两倍做空标普500 ETF-ProShares","NVD3.UK":"LS 3X NVIDIA","OEF":"标普100指数ETF-iShares","LU1670710661.SGD":"M&G (LUX) GLOBAL DIVIDEND \"A\" (SGD) INC","SG9999014567.USD":"UOB UNITED INCOME FOCUS TRUST FUND (USD) ACC","NVDS.UK":"LS -1X NVIDIA","BK4598":"佩洛西持仓","SGXZ81514606.USD":"大华环球创新基金A Acc USD","LU1934455277.USD":"AB SICAV I LOW VOLATILITY TOTAL RETURN EQUITY PORT \"AD\" (USD) INC","SG9999014898.SGD":"United Global Quality Growth Fund Dis SGD","NVIW.SI":"NVDA 3xLongSG261006","LU2249611893.SGD":"BNP PARIBAS ENERGY TRANSITION \"CRH\" (SGD) ACC","IVV":"标普500ETF-iShares","3NVD.UK":"LS 3X NVIDIA","UPRO":"三倍做多标普500ETF-ProShares","NVDS":"1.5倍做空NVDA ETF-Tradr",".SPX":"S&P 500 Index","BK4501":"段永平概念","NVDU":"2倍做多NVDA ETF-Direxion","SPXU":"三倍做空标普500ETF-ProShares","BK4534":"瑞士信贷持仓","SH":"做空标普500-Proshares","OEX":"标普100","SSO":"2倍做多标普500ETF-ProShares","LU0965509101.SGD":"AB LOW VOLATILITY EQUITY PORTFOLIO \"A\" (SGDHDG) ACC","LU0640476718.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQ \"AU\" (USD) ACC","NVDX":"2倍做多NVDA ETF-T-Rex","2NVD.UK":"2X NVIDIA ETP","VOO":"Vanguard标普500ETF","NVD":"2倍做空NVDA ETF-GraniteShares","NVDY":"NVDA期权收益策略ETF-YieldMax"},"translate_title":"Magnificent 7 Mirage：为什么是时候重新考虑您的标普500指数基金了","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"OEX":0.6,"SNVD.UK":0.6,"SDS":0.6,"NVDY":0.6,"UPRO":0.6,"2NVD.UK":0.6,"NVDU":0.6,"MACW.SI":0.6,"OEF":0.6,"NVD":0.6,"SH":0.6,"NVD2.UK":0.6,"NVD3.UK":0.6,"SPY":1.5,"SSO":0.6,"CAPE":1,"NVDS":0.6,"VOO":1.5,"NVDD":0.6,"ESmain":0.6,"MESmain":0.6,"NVDX":0.6,"NVIW.SI":0.6,"NVDS.UK":0.6,".SPX":1.5,"IVV":0.6,"SPXU":0.6,"3NVD.UK":0.6},"content_text":"The S&P 500 was created in 1957 to track the performance of America’s 500 largest companies, offering investors broad exposure to the U.S. economy. But somewhere along the way, it slowly transformed into something else entirely. \nToday, buying the S&P 500 means making a concentrated bet on just ten companies, with the top three (NVIDIA, Microsoft, and Apple) controlling more market weight than the smallest 200 companies combined.\nThis is the S&P 500’s dirty secret in 2025, and if you own any index funds, you need to understand what’s happening right now.\nThe top 10 stocks in the S&P 500 now command 38% of the index’s market capitalization while contributing only 28% of total earnings.\nLet me put that in perspective: you’re paying for 38% of the market’s valuation while getting 30% of its earnings power. That’s the widest gap since 1970, and it should concern anyone who owns the index.\nIn the 70’s, market concentration peaked around 25% during the Nifty Fifty bubble. In 2000, at the height of the dot-com mania, it hit 27%. Today? We’re pushing 40%.\nAfter analyzing the current market structure, and I can tell you with certainty: we’ve never seen concentration like this before. Not during the Nifty Fifty era of the 1970s. Not even during the dot-com bubble.\nNVIDIA alone represents 7.28% of the entire S&P 500. Microsoft controls 7.12%. Apple holds 5.78%.\nThink about that. Three companies only represent over 20% of an index containing 500 of America’s largest public companies.\nIn theory, proper diversification meant no single holding should exceed 5% of a portfolio. Yet millions of Americans unknowingly have triple that concentration in individual stocks simply by owning “the market.”\nEvery major concentration episode in modern market history has the same patterns:\nThe 1973 Nifty Fifty Collapse:\nThe 2000 Dot-Com Bubble:\nToday’s Market:\nThat last point matters. I’ll be honest: I’m not predicting an imminent crash. The Magnificent Seven companies (Apple, Microsoft, NVIDIA, Amazon, Alphabet, Meta, Tesla) are real businesses with genuine earnings and cash flows. From 2014 to 2023, the top 10 stocks represented 47% of total economic profit.\nBut here’s what troubles me: the fundamentals that once justified this concentration are weakening.\nAs someone who tracks multiple valuation metrics daily, I’m seeing red flags across the board:\nThe Cyclically Adjusted PE (CAPE) Ratio currently sits at 38, approaching the dot-com peak of 44. The historical median? Just 17.\nThe Buffett Indicator, which is the total market cap to GDP, has hit an all-time high of 167%, surpassing even dot-com levels.\nForward PE Ratios are at 22.2 times earnings, matching levels last seen in 2000 and 2021.\nThe Russell 1000 index currently provides diversification equivalent to just 59 equally-weighted stocks, down from 202 in 2014. That’s a 71% reduction in true diversification over the past decade.\nPassive investing is amplifying this concentration through a self-reinforcing cycle that has no natural brake.\nAs stocks rise, their index weight increases automatically. This attracts more passive investment capital, which drives prices higher, which increases their weight further. There’s no “sanity check” based on valuation, earnings growth, or fundamental analysis.\nIt’s momentum without a governor.\nDuring the August 2024 volatility and recent tariff-related swings, I saw glimpses of what happens when this cycle reverses. With active managers now representing a smaller portion of market activity, there are fewer natural buyers during stress periods. The next real crisis could reveal just how fragile this structure has become.\nI’m not suggesting you sell all your index funds tomorrow. But I am recommending a hard look at what you actually own versus what you think you own.\nThe Invesco S&P 500 Equal Weight ETF (NYSE:RSP) holds the same 500 companies but allocates 0.2% to each stock.\nHistorical data shows equal-weight strategies have outperformed cap-weighted indices over extended periods, particularly during broad market rallies and value rotations.\nThe key difference: Instead of 31.6% in technology, you get balanced 10-12% allocations across all sectors. It’s still the S&P 500, just without the dangerous concentration.\nI know international diversification has underperformed for years. I’ve heard all the pushback who feel burned by emerging markets and European equities.\nBut here’s the reality: U.S. markets now represent 70% of developed market capitalization. That’s not diversification, it’s a concentrated bet on American exceptionalism continuing indefinitely.\nInternational markets, particularly European and emerging market equities, trade at significantly more reasonable valuations. When mean reversion eventually occurs, these markets are positioned to outperform.\nIf you have large, concentrated positions in mega-cap tech stocks, you can investigate a few protective strategies:\nProtective puts create price floors while maintaining upside participation. Yes, they require ongoing premium payments, but insurance isn’t free.\nZero-premium collars involve simultaneously selling calls and buying puts, creating price boundaries without upfront costs. You limit your upside, but you protect your downside.\nThese aren’t strategies for everyone, but if you’ve watched your NVIDIA position grow from 2% to 15% of your portfolio, it’s time to have the hedging conversation.\nExtreme concentration always normalizes eventually. The only question is how…\nOption 1: Earnings growth catches up to valuations. The Magnificent Seven grow into their current prices through sustained profit expansion. This is the soft landing scenario.\nOption 2: Valuations reset through a painful repricing. The market’s most expensive names fall back to earth while the other 493 stocks continue performing. This is the rotation scenario.\nOption 3: A broad market correction affects everything, but concentrated indices fall furthest. This is the risk scenario that should concern index investors most.\nI don’t know which path we’ll take. Nobody does. But I do know this: owning the S&P 500 today is not the diversified, moderate-risk investment it was a decade ago.\nPeople always ask me this, and I’ll tell you: I maintain S&P 500 exposure, but I’ve shifted roughly 40% of my equity allocation to equal-weight strategies and international markets.\nI’m not making a timing bet. I’m not predicting a crash. I’m simply recognizing that concentration this extreme represents asymmetric risk, limited upside relative to substantial downside.\nWhen NVIDIA, Microsoft, and Apple together represent more than 20% of the index, a significant stumble in just one or two of these names can overwhelm the performance of the entire remaining 497 companies.\nThat’s not a risk I’m willing to take with my family’s financial future.\nMarket concentration at 40% is unprecedented. The valuation gaps are widening, not narrowing. The passive investing amplification continues accelerating.\nI’m not here to frighten you. I’m here to make sure you understand what you own.\nIf you own S&P 500 index funds (and statistically, you probably do) you’re making a concentrated bet on ten companies. More specifically, you’re making a massive bet on three: NVIDIA, Microsoft, and Apple.\nThat might work out beautifully. The Magnificent Seven might continue dominating for another decade.\nBut if they don’t, if this concentration normalizes through any mechanism other than perfect earnings growth, the “safe, diversified” index fund in your 401(k) could underperform dramatically.\nI’ve seen this movie before. The ending is never pretty.\nThe time to diversify isn’t after the concentration unwinds. It’s now, while you still have the choice.\nBenzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0,"need_auth":false,"code":"91000000","status":"200"},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.35.12","shortVersion":"4.35.12","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2571331077","isCrawlerRequest":true}