|
Two Ways to Own the Same 500 Companies
At the 4 p.m. bell Thursday, the Dow had added 556 points. Healthcare led eight of 11 sectors higher, with Eli Lilly up more than 3% and UnitedHealth up 2.8%. Homebuilders such as Lennar and D.R. Horton rallied as bond yields fell. Nvidia fell 1.8%. The S&P 500 finished up a third of a percent. The average stock had a far better day than the index that holds it.
That gap is the whole week in miniature. Through Thursday, the Dow and the Nasdaq are more than three points apart after four sessions, with the S&P 500 in between. If your retirement account holds an S&P 500 index fund, your statement shows the chip slide far more than it shows the broad buying underneath it.
How the weights work. A standard S&P 500 fund owns each company in proportion to its stock-market value. When we looked on Oct. 6, Nvidia and Apple alone made up 15.61% of the index, and the ten largest companies made up 38.69%. Chipmakers and the companies that make their equipment are more than a sixth of it, according to Deutsche Bank. The equal-weight version owns all 500 at about 0.2% each and resets to that share every quarter. One fund lets the biggest winners grow. The other trims them on a schedule and adds to the laggards.
Why the index hears it last. Because weight follows price, a regular index fund only owns more of a group after that group has already risen. This week’s buyers went to healthcare, materials, housing and household names, most of them a fraction of a percent of the index each. Thursday’s 0.9% drop in the chip group, at more than a sixth of the weight, took roughly 0.15 point off the S&P 500 by itself. A rotation has to run for months before it changes the weights enough to show up in your account. The louder voices in the newsletter business pitch the reverse: find the next giant while it is still small, before any index has to buy it.
|
ACTION TAKERS WANTED: Big Elon Opportunity
Elon’s new venture is bigger than Tesla, bigger than SpaceX… bigger than both combined.
Based on a hushed FCC filing James Altucher just uncovered, he believes Elon’s next project will create 1,806,000 new millionaires over the next decade starting December 8.
Almost nobody knows what it is yet, but action-takers who follow the briefing James put together can get first-dibs on the $100 stock at the center of it all.
|
This year’s earlier versions. This is the third time in 2026 the average stock has pulled ahead of the index. In the last week of June, the equal-weight S&P 500 rose 1.6% while the regular index fell 2%. Dow Jones Market Data called it the widest weekly gap since June 2020. In July, the semiconductor index fell 20.6%. By late August, the equal-weight fund led the regular S&P 500 by about 3.6 points for the year, per Morningstar data. Then chips came back. Equal weight last held the lead on Sept. 16, and by Oct. 7 it trailed by about four points, according to Opening Bell Daily. That is a swing of more than seven points in about six weeks. Joe Saluzzi of Themis Trading put this week plainly: “we’ve seen this before.” A few good sessions do not make a trend, and I would not treat them as one. The buying itself went to things people use every week, Walmart among them, up 1.4% after an upgrade. Some investors are taking that idea outside the index altogether, into companies too small and too private for any fund to hold.
|
Private Coffee Shares, Without the Accredited-Investor Wall
Deals like this usually stop at venture funds and accredited investors.
Green Coffee Company’s round is open under Regulation A. The minimum is $1,000.50. No accreditation required.
That $1,000.50 buys about 870 shares of a producer already doing $26M in revenue and shipping to 3,000+ stores.
|
Where that leaves you. Our Oct. 6 edition asked what you own. This week adds a second question: when you trim it. A regular index fund never sells its winners, so the only rebalancing in your accounts is the rebalancing you do yourself. An investor who set a 60/40 split in January and left it alone likely holds more stocks than planned, and more of those stocks in the same few names. Weeks like this one are when a calendar rebalance does its quiet work. It sells a little of what ran and buys what lagged, before anyone knows which way the rotation goes. The bond side helped Thursday as well: the falling 10-year yield lifted the fixed-income half of a balanced portfolio while chips slid.
The Fed goes quiet this weekend ahead of its Oct. 27–28 meeting. Speaking in Bangkok overnight, Fed Chair Kevin Warsh said he does not prejudge meetings. Traders then cut the odds of an October hike to about 15% from more than 25% on Thursday, according to Bloomberg. The chip selloff eased in Asia, where Samsung and SK Hynix each rose more than 4%. Friday’s close settles the week. Next week tells us whether the money that moved into healthcare and homebuilders stays once the Fed stops talking.
The typical stock gained on the index all week, and the fund that holds them all still fell. In an index weighted by size, the crowd only counts once it has grown.
Harold Winston
Advised individual investors for thirty years. Now reads markets for a living.
Stay grounded while markets move fast.
|
