It is January. 27, Nafidia(Nasdaq: nvda) 17 % decreased, erasing more than $ 590 billion from the maximum market. The largest market destruction was for a day for a company in the history of the US stock market.
while Growth Recovered nearly half of those losses the next day, there are still lessons that must be learned from this historical market event.
Let’s dive into the importance of selling, the risks it offers, and how you can put your wallet in response to these risks.
Photo source: Getty Images.
Despite the massive clouds in Nafidia, Broadcom(NASDAQ: AVGO)and Taiwan semiconductorsAnd other chips, the sale of the sale was somewhat isolated.
The next graph shows the 12 largest S & P 500(Snpindex: ^Gspc) Ingredients for the maximum market. Taiwan SemiDuctor is photographing from the market head perspective, but it is excluded from the graph because it is not in the S&P 500.
As you can see, like technology companies such as apple and Dead I enjoyed strong gains, as did the other industry leaders Wal Mart and Berkshire Hathaway. In fact, and Dow Jon’s industrial average(Djindices: ^DJI) Earn 0.7 % a day. However, the Invesco QQQ Trust(Nasdaq: QQQ)It is an ETF (ETF) box that tracks NASDAQ-100, decreased by 2.9 %. the Vanguard S & P 500 ETF(NYSEMKT: Trip) Likewise, the S&P 500 is tracked, and decreased by 1.4 %.
Despite the gains of the multiple securities market sectors, not to mention many individual technology shares, the S&P 500 and NASDAQ-100 still fell sharply on that day because of the importance of large value chips like NVIDIA.
You can determine the impact of the individual stock on the index (or ETF that follows) by hitting the weight of its wallet by moving at the share price.
For example, NVIDIA constitutes about 7.5 % of INVSCO QQQ and 6.6 % of Vanguard S & P 500 ETF. Meanwhile, Broadcom represents 4.0 % and 2.2 % of the holdings in these two traded investment funds, respectively. Looking at its double losses for one day on January 27, these two companies alone reduced the Investco QQq 2.0 % while the Vanguard S & P 500 to 1.5 %. In other words, only two MEGACAP stocks formed the largest part of the price movement of these funds.
The sale in NVIDIA and Broadcom shows the risk of the upper market. As this perception may be, it is also a reminder of the importance of knowing the formation of the index box before you invest in it, including standards such as S&P 500 and NASDAQ-100. However, there are ways to counter the risk of focus.
The best way is to know what you own and why you own, and this means a clear investment thesis for every share or fund in your wallet.
There is another exercise that must be taken into account, which is your real exposure account for every share you own, through the governor and money. For example, if you have $ 3500 in NVIDIA shares, but you also have $ 100,000 in the S&P 500 index, your real exposure to NVIDIA exceeds $ 10,000 because it constitutes a large amount of the index.
Often, investors assume that the indicator or ETF is varied just because it contains dozens or hundreds of companies, but there are varying degrees of diversification.
The S&P 500 concentration is a risk that you should be aware of, but this does not mean that you must fix the entire investment strategy.
The hegemony of the TECH at S&P 500 was mainly driven by the growth of profits. Nvidia is a good example of this as the gains were supported at the share price Increased profits and margin expansion From the basic work.
In short, the S&P 500 is still a powerful tool for the wealthy wealth in the long run, but investors must conduct a wallet review to ensure that they are not excessively exposed to a few companies or topics.
Before buying shares in NVIDIA, think about this:
the Motley Adviser is a lie The analyst’s team has just identified what they think 10 best stocks For investors to buy now … Nvidia was not one of them. The ten shares that made the pieces can produce monster revenues in the coming years.
Look at when Nafidia This list was presented on April 15, 2005 … if you invest $ 1,000 at the time of our recommendation, You will have 735,852 dollars!
Now, it is worth notingStock consultantAverage overall return903 %-Surprisingly chaos compared to176 %For the S&P 500, do not miss the 10 best menu menu.
*The stock consultant dates back from January 27, 2025
Jpmorgan Chase is a Motley Fool Money advertising partner. Susan Fry, CEO of Alphabet, is a member of the Motley Fool Board of Directors. John Maki, former Chole Foods Market, a affiliate company, a member of the Motley Fool Board of Directors. Randy Zuckerberg, former Director of Market Development and Speak for Facebook and Sister to Meta Platforms, Mark Zuckerberg, member of Motley Fool Board of Directors. Daniel Fileber He has no position in any of the mentioned stocks. Motley Fool has positions in Alphabet, Amazon, Apple, Berkshire Hathaway, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia and Taiwan Semiductor Manufacturing, Tesla, Vanguard S & P T. Motley Fool Broadcom recommends the following options: Long from January 2026 $ 395 calls on Microsoft and Short January 2026 $ 405 calls on Microsoft. Motley deception has Disclosure.
