2023-07-21 16:50:28
The ideal situation as an investor is when you invest all of your money in the stock with the highest price gain. This year, for example, in the Nvidia share, which is a good 200 percent higher than at the beginning of the year. Unfortunately, since it is not known in advance which paper will be the ideal case, diversification is the order of the day. It is also the essence of investing in mutual funds. Anyone who has invested their money in the Nasdaq 100 ETF, for example, comes close to the ideal fund investment this year: more than 40 percent price growth since the beginning of the year for an index, that doesn’t happen often. For comparison: Like the MSCI World, the Dax “only” manages 16 percent and the Dow Jones only 6 percent.
It’s no big secret why it’s propelled the Nasdaq-100 so much higher. After a crisis in tech stocks in the course of 2021 and well into 2022, some market participants noticed that Apple, Microsoft, Alphabet, Amazon, Tesla, Meta and Nvidia could be very useful companies for the future, some with Dagobert Duck-like stores full of money, a high level of expertise in topics related to digitization and – the latest hype – in artificial intelligence, with which some now prefer to chat to real people.
On the stock exchange, the seven big tech companies from the USA were christened the “magnificent seven” because of their success. Unlike in the 1960 western, however, they are not embodied by Horst Buchholz, Charles Bronson or Steve McQueen, but by Tesla’s Elon Musk, Meta’s Mark Zuckerberg or Apple’s Tim Cook. For the Nasdaq-100 index, success would be nice if it weren’t for the problem of common sense. Investors want to diversify their money (and sometimes they have to) in order to reduce the risks of investing.
Around 35 billion dollars have to be redeployed
At the beginning of July, the magnificent seven in the Nasdaq 100 reached a weight of around 58 percent. The remaining 93 values together accounted for 42 percent. This has little to do with reasonable diversification, and so the index provider will reduce the shares of the seven heavyweights in the index to 44 percent from Monday. Microsoft will take it particularly hard. Instead of 12.8 percent, the share is only to be included in the index with 9.8 percent. Apple will take the lead, capped from 12.1 percent to just 11.5 percent. Next to Microsoft, Nvidia is being cut the most. The winners will be the 93 smaller stocks, especially stocks like Broadcom, Pepsico, Adobe and Netflix.
Dennis Kremer Published/Updated: , Recommendations: 25 Wieland Staud Published/Updated: , Recommendations: 6 Daniel Mohr Published/Updated: , Recommendations: 27
Thursday provided a preview as the Nasdaq-100 fell 2.5 percent, its strongest this year. The Nasdaq 100 is the base value for many ETFs with an estimated market volume of 250 billion dollars, which now have to sell correspondingly large blocks of shares from the heavyweights. Far fewer ETFs are issued on the Nasdaq Composite, which comprises more than 3000 stocks, because of the more complex replication. The tech heavyweights have also gained in importance in the S&P 500 and the MSCI World. In the MSCI World, however, the magnificent seven only account for 18 percent of the index. In the Dax, SAP and Siemens can do this almost alone. Magnificent Seven are not in sight here until further notice.
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