The S&P 500 has gained 27% in 2024, propelled by AI-focused stocks known as the Magnificent Seven, including Nvidia and Microsoft. This rise has led the SPDR S&P 500 ETF Trust (SPY) to new heights, but it has also fostered a concentration risk as just ten stocks dominate the index's performance. The Invesco S&P 500 Equal Weight ETF (RSP), however, has a better long-term return since 2003 due to its diversified approach. Investors now must choose between SPY's tech-heavy gains and RSP's balanced strategy to protect against potential corrections.
The S&P 500 has surged 27% in 2024, driven by AI-fueled Magnificent Seven stocks, boosting SPY's performance.
Since 2003, RSP has outperformed SPY, suggesting its diversification could better weather a market correction.
Investors now face a choice: ride SPY's tech-driven wave or opt for RSP's balanced approach to mitigate emerging risks.
The S&P 500's once-broad diversification has eroded, with just 10 stocks now accounting for a significant portion of its performance.
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