As a investor following the values of Bogleheads, managing your portfolio into S&P500 and Nasdaq indices is reasonable. But is it perfect?
Recent skyrocketing AI-driven technologies is steering the wheels of the market indices - what is called "M7" or "BigTech" - but it has also brought the fate of volatility as well as AI-panic in the market. The recent waves of the stock prices reflects this momentum.
So investors now have to be wise, by quantifying how much weight, or time, of risks they can endure. Above all, I'm not pessimistic of the future of technology-driven waves of the US market, but it is the different matter that you can endure, ride and encompass the objectives of portfolio on that.
Let's go to the detail. SPY and QQQ, which follow S&P 500 and NASDAQ 100 respectively, are analyzed by portwise.app, calculating the overall overlaps between two ETFs. The percentage is calculated by adding up the minimum percentage of each ticker between two or more ETFs. For example, when NVDA has 6 percent in ETF "X" and 9 percent in ETF "Y", selecting 6 instead of 9 and adding up the selected percentage of each ticker.
As you see, the overlap percentage is over 50%, which is high so that it is unreliable when it comes to managing portfolio of only two major ETFs.
Many investors push their bullets targeting major ETFs such as VTI, QQQ, VOO, SCHD because they believe the "stability" of index-driven logics and partially it is reliable. But this data shows that, even the well-sorted major ETFs have the potential risks when they are collaborated - high return but high risk.
Some people then may become curious and ask about, "Well.. Then what is the alternative?" I would rather say that, "Tell me the prerequisites.", which means the purpose and value of your portfolio. As many problems in real life do, even investing matters have no one-specific choice to beat the market every time. So investors have to calculate themselves about "how long they can endure the pain" as well as your goal of the portfolio. When you are ready to endure long, your portfolio can be changed into aggressive position.
Portwise is the tool based on web, helping the investors to recognize the potential risks they may have to endure by pointing at negative aspects of your portfolio based on critical perspective. Yes, it doesn't show "bright aspects" of your portfolio like profits during the previous year. Many people are reluctant to see about negative view, right? But it is much better to watch it than being retired by non-endurable waves by "just a casual but critical" choice you may make.
That is the concept and philosophy of Portwise. Thank you for reading and if you have any questions, please contact the email below. Thank you.