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https://awealthofcommonsense.com/2020/07/explaining-the-2020-stock-market/Cyclical stocks had their day in the 1940s, 1950s and early 1980s but the market is now dominated by growth, stability and defense stocks. Cyclicals are now at their lowest weighting in the index on record.
If you invested in a simple S&P 500 index fund you didn’t have to predict this sea change in advance. You didn’t have to make a bet on certain stocks, industries or sectors. The winner-takes-all nature of the S&P 500 itself did this for you.
The same is true of the larger stocks outperforming in 2020. There were no tilts involved to benefit from these moves. No research or financial statement analysis or reading through quarterly earnings transcripts. The market does all that for you.
Market cap weighted investing is far from perfect and doesn’t diversify investors from every risk out there. But it remains one of the hardest investment strategies to beat because of its very nature.
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