Big Tech’s Magnificent 7: Diversifying Your Portfolio for Long-Term Success
In the fast-paced world of investing, it’s easy to get caught up in the hype surrounding Big Tech’s historic gains. But what if I told you that this frenzy could actually be impacting the diversity and stability of your investment portfolio? According to Astoria Portfolio Advisors CEO John Davi, the S&P 500 index may be leaning too heavily on what he calls the “Magnificent Seven” stocks: Apple, Microsoft, Nvidia, Amazon, Meta Platforms, Alphabet, and Tesla.
During a recent appearance on CNBC’s “ETF Edge,” Davi cautioned investors about the current valuation of these tech giants. “Those Mag Seven stocks are very expensive right now,” he warned. “You should rotate your portfolio, and rotate into other things beside ‘Mag Seven’ stocks.” This advice comes as a wake-up call for those seeking to balance risk and reward in their investment strategies.
To address this concern, Davi has introduced a solution for long-term investors through the Astoria US Equity Weight Quality Kings ETF (ROE). This innovative fund focuses on investing in 100 of the highest quality U.S. large and mid-cap stocks while steering clear of the concentration risks associated with market-cap weighting. “Our marginal contribution to risk and return is a lot higher,” Davi explained, emphasizing the potential benefits of diversifying beyond the usual suspects.
As of January 31st, the top 10 stocks in the S&P 500 are predominantly from the tech sector, comprising approximately 36% of the index, as reported by FactSet. In contrast, the Astoria US Equal Weight Quality Kings ETF takes a different approach by assigning each stock a weight of around 1%. Since its launch on July 31, 2023, the fund has seen a solid performance with over a 26% increase. Comparatively, the S&P 500 has grown by 32% during the same period, highlighting the potential advantages of exploring alternative investment options.
Exploring Diversification Strategies Beyond Astoria’s ETF
While Astoria’s ETF offers a compelling solution for diversification, there are other options available to investors looking to refine their portfolios further. Todd Rosenbluth, from VettaFi, suggests considering alternatives like Invesco’s S&P 500 quality ETF (SPHQ) or American Century’s QGRO ETF for those seeking a more nuanced approach to quality and growth filtering. These ETFs provide additional layers of analysis based on specific criteria, offering investors a range of choices to tailor their investment strategies to their unique preferences and risk tolerance.
In the ever-evolving landscape of investing, the importance of diversification cannot be overstated. By exploring innovative solutions like the Astoria US Equal Weight Quality Kings ETF and other quality-driven ETFs, investors can proactively manage risk and potentially enhance long-term returns. As the market continues to fluctuate, staying informed and adaptable in your investment approach can be the key to achieving financial success and security.
Investing wisely is not just about chasing the latest trends or following the crowd—it’s about taking calculated risks and diversifying your portfolio to weather the uncertainties of the market. By heeding the advice of seasoned experts like John Davi and exploring diverse investment opportunities, you can position yourself for long-term growth and stability in your financial journey. After all, in the dynamic world of investing, adaptability and foresight are the hallmarks of a successful investor.
