Most individual 401(k) investors want the easy answer.
The simple mutual fund pick.
To follow the “diversification” mandate they hear so much about.
That’s why the two most popular 401(k) mutual funds choices.
Are target-date mutual funds number one.
And the cap-weighted S&P 500 index mutual fund number 2.
I see a problem right now in the S&P 500 index mutual fund option.
You would think owning a basket of 500 companies.
Would be textbook ‘diversification.”
Not in America.
The largest individual stock positions in the S&P 500 index.
Microsoft, Nvidia, Apple, Amazon, Meta, Alphabet, Broadcom.
The common element or stock market sector in those stocks?
Artificial intelligence infrastructure.
The S&P 500 index is not “diversified” at all.
Company spending and earnings are concentrated.
At a dangerous 401(k) stock market risk level.
There is false “diversification” in the S&P 500 stock index.
If the AI bubble bursts?
There will be many surprised 401(k) investors.
Are your 401(k) mutual funds concentrated without your realizing it?
Let’s connect and I can share the details.
P.S. Right now, you need a clear picture of the stocks in your 401(k) mutual funds.
