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Time to dig deeper

Are you aware that by the end of 2021 the top 10 stocks represented a disproportionately large weighting, about 1/3 of the total market value, of the S&P 500? This calculation is based on the stock price and the number of shares issued. The S&P 500 is a market capitalization index. While these top 10 boomed last year, the other 490+1 stocks struggled. If you dig deeper, what the index has been showing as record-breaking returns, was actually an indication of the overinflated valuation of the selected few listed below.

  1. Apple (APPL),
  2. Microsoft (MSFT),
  3. GOOG & GOOGL (Alphabet Inc.),
  4. Amazon (AMZN),
  5. Tesla (TSLA),
  6. Facebook (FB),
  7. Nvidia Corporation (NVDA),
  8. Berkshire Hathaway (BRK.B),
  9. JP Morgan Chase & Co. (JPM),
  10. UnitedHealth Group Incorporated (UNH)

To put this into further perspective a 1% gain in the top 10 is about the same as a 1% gain in the bottom 90%. (source Advisor Analyst). We have our eye on the top 10 but have a much keener interest in finding value in the bottom 490+.

Since the beginning of 2022, these stocks, primarily technology, have been declining in price. It’s not surprising that investors have decided to take some profits and move their money to sectors that are undervalued at this time. Rapid rotation away from last year’s winners often occurs in January. The fear of inflation and rising interest rates has also spooked investors. The rotation is dramatic, but if you’ve been disciplined in your allocation to technology, although unsettling it does not warrant panic. This correction will be beneficial to remove some of the risk-taking and foolish speculation from the marketplace, but technology-driven innovation is going to continue to evolve.

The investment landscape has been changing rapidly in light of the pandemic and its economic ramifications. We’ve been further strengthening our investment toolkit, in terms of research and also access to high-quality institutional managers typically available to the ultra-wealthy. Tune in, we look forward to introducing new strategies soon.


1 At this time there are actually 505 listings in the S&P 500 Index. Companies like Alphabet have more than one class of shares (GOOG and GOOGL).


The information in this commentary is for informational purposes only and is not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

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