The finance textbook says that investors should diversify their investments. But there is little diversification today when buying the S&P 500. The combined weight of stocks with a weight of 3% or more in the S&P 500 index is at an all-time high and continues to rise, see chart below.
The bottom line is that buying the S&P 500 gives the impression that you are buying 500 different stocks and diversifying your investments. But the reality is that the high and growing concentration in the S&P 500 continues to be a major problem.
In short, investors should ensure that their portfolio is not all levered to Nvidia earnings.
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