Hopefully the 16 year old will not read this post, ESPECIALLY during Finals week! eekkk – but this is not the type of Concentration we are speaking on….
Spoke about this a bit before in our Q 3 Report and used a sports team analogy… the team analysis seemed fun but Concentration is likely a broader, easier word to explain….
This is a screen layout from our new fun Koyfin research platform…. no need to squint.. but for the record these are different time frames, from 1 month to over 20 years for easy visual context and monitoring….
This is a Capital Weighted S&P index (most popular) less/minus the Equal Weight Index (more of a tester index just for this type of analysis and health check.)
We are going to call attention to the longest term Chart… far right lower above!
Points we hope you take from this:
- Generally the less concentrated equal weight index wins (slope down to right) – actually it should as it is slightly more risky because smaller companies weigh more
- Moves of concentration are historically small periods of time and unusual
- Unusual concentration lends itself to overdramatic movement – moves up prior to large fluctuations
- We watch this type of thing closely for measures of risk in the Capital Markets – They are greater at the moment!
Have a Great “Concentration Newsletter Footnote” Article Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
