"Invest for the long-term," "buy-and-hold," "stay diversified," are the mantra of every asset-gathering commission-taking 'manager' out there... However, as JPMorgan notes, empirically that is a loser's bet. In fact, investors owning just the top 10 performers of the S&P 500 has never suffered a single rolling 12 month period loss (lowest was April 2009 +0.24%).
Getting a few key calls correct this cycle (Apple, Google, Facebook, Amazon, Microsoft, Gilead, etc.) meant the difference between outperforming or lagging the index. For instance, if one were to strip out just the top 10 contributors to the S&P 500 over the last year, the index would have a negative total return (vs. +3.6% YTD as of 12/4).
- Owning the worst performing 490 out of 500 stocksin the S&P 500 has had a negative 12m total return during 38% of periods over the last 15 years.
- The top 10 out of 500 stocks never had a single rolling 12m period with a negative return (minimum 12m return = +0.24%, April 2009).
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So that's why everyone is piling into the best performers.
Amid FANGs, NOSHs, and just NFLX all on its own... Stock concentrations are building dramatically. However, history tells us that this level of performance concentration is only marginally above average and well below the outlier levels of the Tech Bubble.
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Charts: JPMorgan
