Nir Kaissar Published on Fri, Aug 13, 2021
Six stocks that account for a quarter of S&P 500 Index’s weighting — Apple, Microsoft, Amazon.com, Facebook, Alphabet and Tesla — have averaged a total return of 41% a year over the past five years. Photo: Bloomberg
When the story of this era in financial markets is written, it will be said that many investors were overtaken with fanciful notions of money growing to the moon, leading them to make costly mistakes that could have been avoided with simple steps to safeguard and grow their savings. But this era is not over yet, and it is not too late to get on the smart side of history.
The idea of growing money gradually but reliably with a diversified portfolio is becoming frighteningly passe. Billionaire investor Mark Cuban may have kicked off the trend a decade ago when he declared that “diversification is for idiots.” A parade of high-flying investments has reinforced the message in recent years, conditioning investors to believe that big, concentrated bets are a quick and reliable way to get rich. Bitcoin, for instance, is up more than 10 times since crashing in 2018. Shares of electric carmaker Tesla Inc surged more than 10 times in just more than a year from 2019 to 2020. Meme stocks GameStop Corp and AMC Entertainment Holdings Inc have risen well above 10 times this year.
