Will The Magnificent Seven Stocks Continue To Dominate?
ฝัง
- เผยแพร่เมื่อ 17 มิ.ย. 2024
- #Ad 🌏 Get our Exclusive NordVPN deal here ➼ nordvpn.com/pensioncraft It's risk-free with Nord's 30-day money-back guarantee!
Many people are concerned that the US market is dominated by just seven stocks, "The Magnificent Seven". In this video I look at the reasons behind this success and whether it is likely to continue. I also discuss whether it is sensible to tilt away from these very successful stocks and if you decide to tilt away, I will show you some different ways you can do it.
What Else PensionCraft Offers:
💡 Become a pensioncraft.com member and learn how to be a better investor. To find what we offer and how you can join our friendly community click here www.pensioncraft.com/investor...
❓ Book a coaching session with Ramin so he can answer your questions in a one-to-one video call via Zoom: pensioncraft.com/power-hour/
📰 Sign up for our free weekly market roundup to get news and views about what's going on in the stock market and wider economy pensioncraft.com/market-roundup/
📖 Understand investment in more depth with my online courses pensioncraft.com/courses-we-o...
🎧Check out our free weekly podcast "Many Happy Returns" on your podcast provider of choice or here many-happy-returns.captivate....
Timestamps
00:00 Introduction
00:33 The Magnificent Seven
02:25 Will They Continue To Dominate?
08:43 Should I Tilt Away From Them?
10:47 How Do I Tilt Away From Them?
I Use The Following Data Sources To Help Me Create My Videos
(These links provide new users with a special offer and may also provide me with a small commission)
✔️Stockopedia - New users of Stockopedia get a special 25% discount on any annual plan if they use this link stk.pe/pensioncraft
✔️ Koyfin - New users of Koyfin get 15% off when signing up through this special link koyfin.com/?via=pensioncraft
✔️ Sharepad - sharescope.co.uk/pensioncraftsp 2nd month free for monthly subscribers & Additional free 13th month for annual subscribers
✔️Cbonds - provides you with a high quality and comprehensive source of bond market data and up to 50% off their private investors’ dedicated plans when you use this link bit.ly/47nekIM
Where Else You Can Find Me
🌐 Website - pensioncraft.com/
📱 Twitter - / pensioncraft
👨 Facebook - / pensioncraft
🔗 LinkedIn - / pensioncraft
Take A Look At Some Of My Other Videos & Playlists
📹 Investment Strategies playlist • Investment Strategies
📹 Income Investing playlist • Income Investing
📹 Investing With Vanguard playlist • Investing with Vanguard
📹 Portfolio Building Blocks playlist • Portfolio Building Blocks
DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
If you need financial advice, Unbiased, the UK’s leading online directory of financial advisers, can connect you to an Independent financial advisor for free. Additionally if you use our link to register with Unbiased, your first consultation with a financial adviser is free. imp.i337888.net/c/4012142/193... (This link provides you with a special offer and we will also earn a small commission)
#Ad 🌏 Get our Exclusive NordVPN deal here ➼ nordvpn.com/pensioncraft It's risk-free with Nord's 30-day money-back guarantee!
If ever I had a thought about paying for a VPN (I use a free one, haha 😃), I'd definitely buy a competitor of NordVPN. It does too much of this annoying advertising. I go out of my way not patronise companies which advertise, and the more annoying the advertising, the less likely I am to buy. Jus' sayin'.
Great video! A lot of people are talking about CHILIZ (CHZ). New partnerships and a lot of potential with the upcoming European Championship. Analysts are talking about a price target of 2 dollar. Your thoughts?
Spot on, I agree. I do exactly the same.
I was exactly thinking of what you said in the video , really exactly!!!
But unfortunately I’m still undecided about it whoever your videos always wonderful and your knowledge and expertise is highly valuable
Regards from Egypt
Exactly the video I was looking for. As always, thank you
Thanks @edwinmarr-wr4pz
Thank you! please keep it up. Very informative and no fancy terms and set up. just pure gold
Thank you @RelaxingCalmingClub
Thanks. Very interesting and informative.
Glad it was helpful! @CMac78811
You can really distill complex topics (for me) into understandable videos. Are there any videos yu've made on splitting the S&P 500 into individual sector ETFs, and what kind of returns / costs we'd incur?
Great video. I can see these constantly growing over time. There may be a correction but ultimately what can challenge them? Certainly in the next 5-10 years, the Mag 7 are the defacto...I was stupid enough to sell my shares in these companies though.
Innovation drives growth and tech is likely to be at the forefront, but yes the market needs more breadth.
A long time ago there was a group of stocks known as the 'Nifty Fifty' where no price was considered too high. It didn't end well. Those who ignore the mistakes of history are condemned to repeat them.
I don’t believe the Nifty Fifty is comparable to massive multinational technology conglomerates. But I do agree with the those that don’t study history bit.
@wadeboggs5163
IBM, HP and Zerox were tech multinationals.
Fear is the thief of joy!
I’m happy with my big stake in L&G Global 100, which is heavily invested in the mag 7. I wouldn’t be confident enough to buy big in any individual company stocks though…you never know what’s around the corner.
Sure you are, the question is, will you still be happy with it in the future.
No heart
@@christianh.1437 Stop/Loss at 10% and Bob's your uncle.
In 10 years time
The s and p 500 top 20 companies may contain many companies thats not in now ,just like 10 yeara ago the s and p looked very different
Buy the s and p every month and chill
The uk FTSE is flat and a pancake and finihsed imo
Or just buy a global fund and have the best of, hmmm, all world
A cash ISA is better than the FTSE 100.
Ramin, Is there a website that aggregates current performance of money market funds?
Hi Ramin, Can you do a video on potential for a US and global recession in the near future? Thanks for all you amazing videos.
Love watching your videos. Just one question; do you buy individual stocks?
He spoke about using stockopedia to screen and small uk focused fund in previous videos.
Full disclosure, I own all of them via a tracker fund and therefore have a vested interest in their continued success. However one of the biggest mistakes people make is so called 'recency bias'.
Beautiful and informative video as usual, Ramin! Thank you! To gain exposure to the tech companies that are driving the market, wouldn't it make sense to have a portfolio consisting of a whole market ETF and QQQ in a 70:30 ratio?
Thanks for doing shorter videos. I skipwd lots of your recent videos because they were too long even ven i watch them with speed 1.5 As always interesting and valuable views from you. Thanks.
Great vid as always. Would be great if you do similar a video about Granolas as well.
The algorithm does its work. Was literally looking at this over the last few weeks. I really wish there was a Global All Cap that was weighted by the Square Root of Market Cap.
"Equal weight" is definitely a good diversification idea to look at
Or small cap, mid cap, international and fixed income
The way i tilt away from them sort of Is 80% FTSE all world (not just S&P 500 or just the US) and 20% small cap value weighted in the US and Europe. Compared to someone who invests 100% S&P 500 i have much less exposure to the magnificent 7.
I've been wondering about this - I'm just going to sit tight with my current Index Funds.
As for ensuring good behaviour when things slump? I watch a test crash dummy video. The dummy does nothing and it mostly get's to walk away.
A very helpful video - Thank you.
Thanks @kevinu.k.7042
ETF s the whole index , you will always get some gain from these. yep tech is in and probably will be the case for some time to come. but simply diversify over different sectors , this your doing in buying the voo or spy or eqqq . the nasdaq eqqq is my fav.
Was thinking earlier, most videos advice is based on full working life investing. If you are 10-20yrs from accessing your pension, should the S&P500 not be more attractive as US is so strong and MOST PROBABLY will still be the strongest stock market in next 10-15yrs? I am in this position and i am invested in VHVG and wonder should i keep it, move it to S&P500, or mix the VHVG with S&P on a 60/40% or 70/30% basis to pump up the US bias. Any thoughts on this by others?
Thank you for your calm sensible analysis, as ever.
My pleasure! @Rich72James
Ramin, have you given up on the golden butterfly portfolio where the ulcer index is lower?
The "magnificent 7" as you put it, is fluid and most of the growth in the market happens amongst then. I'll extend it to "magnificent 9 to 11".
In summary, I think one is more likely to capture most of the market growth by investing in the top 9 stocks by market capitalization using a "ladder" system.
Alternatively, do the same for with Russell 2000. Happy investing.
Hello Ramin, Thank you for another great video! Would it be possible to split out (isolate) the magnificent 7 stocks from the remaining 493 stocks in the SP500, I wonder. I know Vanguard has a Megacap index fund but I don't know how to get a cap weighted 'SP500 minus Magnificent 7' index. This could be useful in a proportional rebalancing strategy. Your opinion on this as a possible approach would carry a lot of weight with me. Thanks again for your clear minded and expert insights on investing 😊
In terms of performance the midcap part has been the best historically.
Not in the last few years. The S&P is literally being carried by these companies….NViDIA is doing it on its own at the moment in terms of growth
@@TheSilvercue true, but that hasn't made up with the long term over performance of s&p400
@@alemadd
I thought small caps outperformed over the long term.
Personally i think you should overweight the magnificent 7 as a hedge against any potential disruption and economic dislocation caused by AI. It seems like most of the productivity and economic benefits of AI will accrue to these companies and their shareholders so you need to have a stake especially if your job has the potential to be replaced by AI
And what knowledge do you have that qualifies you to call the future on AI better than the market?
@@TheUndulyNoted He said " I think ". Do you ever think ?
@@TheUndulyNotedcalm down boggle freak portfolio theory says you must take into account your human capital risks
7:23 - look at where Nvidia's share price was (date unknown), and look at where it ended yesterday (23 Feb 2024) - be interesting to know how this impacts the "% Under or Over Valued" row
If someone is very young, mid 30s or 20s. Would it make sense to tilt towards smaller names?
If I were in that age group, and knowing what I know now, I would definitely be putting a small amount each month into global smaller companies.
@@richardwhite1120 what do you know now?
This was great to listen to. Thanks.
Thanks for listening @bugsvan
Such a good video. Thanks for posting Ramin
This is a great question, and one I have been pondering myself lately. I am definitely concerned about my exposure to the magnificent 7, and of course whether an AI bubble has formed that might be about to burst.
My entire life’s wealth that I’ve worked years to accrue is 65% invested in stocks, of which 65% is in the USA. This is my retirement at stake here and it genuinely concerns me.
I didn’t know there was an evenly weighted option out there. Gonna do some digging I think. I’m not switching everything over, but I do think I’d like to reduce my exposure to the 7 by “some” amount (TBC). Not too much, because I agree I think these are excellent companies, but just enough to ease the nagging doubts.
An S&P 500 ex-Nvidia ex-Tesla anyone? 😊
Once again, thanks for this video, really good!
I think that Tesla is over valued if you compare it to say Toyota and look at car sales.
Very informative and balanced as ever Ramin.
Glad you think so! @timwood101
Damodaran wrote a piece after Nvidia's stock popped in late May last year. His DCF showed it was overvalued, even with very optimistic assumptions. He said he'd sold half his holding of NVDA. While it looked irrational to keep half, with hindsight it was the right decision, or at least much better than selling the lot. I believe it shows the case for intuition in investing. Maybe not for everyone, or completely relying on it (he did sell half). I'm not sure if that's a controversial point of view.
I'm not sold on Tesla and Meta in the long term.
Yep, Tesla has very little moat and Meta is in my view a 'fad'. The others in the 7 have products and services which are difficult to beat. Microsoft for instance is the king in personal computers, medium and large enterprise software and has fairly good hardware. I'm on the fence about Apple, their largest revenue comes from mobile phones, you just have to think back to Nokia and Blackberry to see what could happen.
Agree with all of the above as well.
4:30 common misconception. Technically they can sniff unencrypted DNS requests and the first leg of the TLS encryption channel, but once that’s established (that’s how you get the green padlock) all traffic is impossible to sniff out because it’s encrypted from your computer to their server. All brokerages worth half a lick use TLS on everything nowadays, so a VPN really adds no additional benefit from that perspective.
You could also go for either a global or a US dividend fund which still gets you top companies but not necessarily the magnificent 7.
Hey Ramin, on your podcast (which I love) you mentioned you’ve allocated something towards the UK? Is that in what you class as your fun portfolio? I’m thinking of putting 20% of my monthly allocation to the ftse uk all share! Thank you.
If you want UK exposure then FTSE 250 has the most
Great video, thank you very much.
You're welcome @MA-pu6dc
Brilliant, as always :)
Thank you! Cheers! @rafaelf6994
So it's not a bubble! Keep investing in your world indices boys!
Could someone suggest what I should do. I’m currently with vanguard and have an ISA that I opened a month ago. Iv got 5k in life strategy and 4K in SnP500. I’d like to transfer my ISA from vanguard to invest engine. Because of the frees. So going forward I want to stay with invest engine. Can this be done? Invest engine doesn’t have life strategy. What should I do. It has to be a transfer because of ISA rules for 2023/24. Thanks
You should be able to transfer the cash in your ISA to Invest engine regardless of what funds you have with Vanguard. When you transfer to Invest engine, your cash will be there ready for you to choose whichever funds on Invest engine's platform that you would like to invest in. It doesn't matter what funds you have held previously.
@@Andygb78 that sounds great. Thank you
Magnificent 7 was just a western remake of seven samurai
Great video
Thanks @ebrahimhabib477
Brilliant! Thank you!
Glad you liked it @fritz2eierkopf249
I'm not brave enough to be buying these stocks, but my largest positions of SMT and ATT have plenty of exposure, and I'm generally happy to be buying in with the fairly large NAV discounts on offer.
One final thought. When most people are thinking the same thing, most people aren't thinking. Don't know who that's attributable to but it's been proven again and again.
Can you please elaborate? I think you're onto something big here.
Sure, I can't claim credit for the saying but basically the idea behind it is the fact that people have a tendency to focus on recent returns and assume that they will continue. History shows that sometimes they do but often they don't and this is where danger lies. I have some wonderful mentors and 40 years of experience to thank for this.
Another great saying is that you make money when you buy and not when you sell. In other words your future returns are driven by the price you pay.
@@richardwhite1120 Thank you!
Yes is the answer
Sorry Ramin could you please write down the youtube channel name for the dean of valuation? Thanks!
His name is Aswath Damodaran - that should let you find his channel @minyinlow1913
@@Pensioncraft thank you Ramin! 😁
Why not russell 2000 as small/medium cap?
Any suggestions on funds or trust which covers this?
It’s the mag 5 really. AAPL and TSLA don’t really belong on the list any more. The Russel2000 is also pretty dominated by MSCI too. I think there’s more room to run but I think I’m going to open a pair trade at some point this year and short SPY (or an equivalent) and buy the RSP (or an equivalent). I may sell SPY calls and buy RSP calls with a year to run but it depends on my conviction at the time. Like I say. AI has some more room to run. When NVDA hits $1200 per share I might take a look.
It is hard to avoid these. Even global tracker funds have so much allocated to these companies.
Just started trading on Thursday your video made me a little calmer😊
There are no traders here, only long term investors !
@@coderider3022 got it 👍 just started investing on Thursday😃
@@coderider3022 got it 👍 just started investing on Thursday (better mindset )
Although Alphabet, Amazon, Apple, Microsoft are still labeled as tech companies, they have long become consumer staples companies. We use their products or services more frequently than we go to grocery shopping.
Is the Nasdaq a better index than the sp500 to buy into for the next 5 years then?
It’s got rules on the weightings taking up large percentage of the top listings and reweighted them mag 7 as they occupied too much. Could happen again. Better looking at IITU instead ?
Duh!
Il stick to my ftse global all cap which dilutes the top holdings.
I just stick with world tracker
👌
It’s only really one stock nvidia.
My global tech tracker is up 188% in 5 years and it's hard to avoid the big 7, though it's certain that they will slow down at some point
Thats terrible. What crap are you invested in! You should be up 400%
@@crimsonpirate1710 I own a fund named Legal and General Global Technology, which is up 238% over a 10 year period from 2014 to 2024
Tesla should be removed from the 7.
These are mostly tech companies, since tech is about boosting everything else in the economy, along with some of its own things it creates like Iphones, etc, its likely they can continue...As always, diversify, just in case😀IBM was also a tech giant in the past, but its stock performance has been a disappointment.
The mag 6 may not continue but the mag 1 will catch up
In tech, the winner takes it all. I wouldn't go away from the winners, albeit expensives.
You’re probably right about the magnificent 7. The risk, however, is their dependence on specific revenues. Alphabet needs to dominate search and search is likely to change heavily over the next decade, given AI’s impact. Apple is dependent on iPhone and there are questions about what the future device paradigm will look like. These are the risks.
Thank you for your content by the way. It’s great.
Apart from TESLA, all of the others are cash - rich , have tiny loan debts, unaffected by interest rates, unaffected by wars and they are on the desks of hands of the global population. They will not go away . They are also addictive.
This video makes imo few probably incorrect assumptions...
1. Valuation model for M7... based on earnings predictions which may not be correct. Is for example Tesla fairly valued at PE 45 & fwd PE the same? Unlikely.
2. One must have US stocks because it's the largest market. What? Largest or not, it's still overvalued.
3. Getting away from M7 to rest of SP500... Good idea, but aren't pretty much all US funds currently expensive?
4. Last decade megacaps winning... Right, but at the same you noticed how the equal weight outperfromad exactly during last two larger market crashes... when the megacaps had high valuations such as currently.... which is the ecact point people might want sell M7.
...However tilting away and getting back back later on to US stocks does make sense - when they're fairly valued. Meanwhile I'm buying other countries & bonds while trying to have enough dry powder ready. Of course US stocks may stay expensive for quite some time, but imo that's not good enough reason to invest on US stocks at these evaluations.
Which other countries are you buying?
@@shellyperera2010 I've recently bought:
-China + Emerging Markets Asia (China, India, Taiwan, South Korea etc).
-Finland fund few months ago.
US is only 12% of my portfolio currently, and it's "defensive" minimum volatility fund which I bought a year ago.
Why don't we just call them TANMAMA?
In S&P 500 we trust!
What were the 'Magnificent Seven' in the 1980s before any of them existed?
A different 7.
IBM
AT&T
EXXON
GE
SHELL
PHILLIP MORRIS
MERCK
@@Brown969 Thank you.
Seven Samurai (1954)
Always been a large concentration to the main companies of the day. Trains and fright stuff way back when.
If none of them pay any dividends, The only gains will b capital gains ,I know I left school at 16 with no exam to my name ,But this looks like a pyramid , everyone jumps in until no one has any money left ,the gains are only sentiment if there's no dividends, unlike say legal and general where u r getting 8% year in year out, umm
Ha, down 6/7% in the last 5 years so you’re total return is hardly 8% is it???!!!!
Microsoft apple meta and nvidia all pay dividends. Albeit a small amount.
The job of an investor is not to identify a list of companies that he likes and then spend his day convincing himself that they are cheap no matter what.
"Fundamentals have driven the stock higher". What does that even mean with earnings multiples of 30x, 40x, 50x?
It is much easier to focus on earnings and risk/reward. Take Visa for example: at around $280, you get a ~1% dividend yield and a ~2% buyback yield. Assuming sustained 7-10% growth going forward, we have a fairly predictable 10-13% business return.
All good so far... assuming that the multiple stays around the current 32x.
If the multiple contracts to 25x in 5 years (-5% CAGR), we are down to 5-8%
If the multiple contracts to 20x in 5 years (-9% CAGR): we are down to 1-4%
And if growth/margins take a hit in a recession, we are in negative territory.
This is a poor risk/reward profile, however great the company is: growth MUST stay strong, margins MUST stay wide and multiples MUST stay high in order for you to do well. Too many must's: that is what price to perfection means.
There's a point where % growth becomes unsustainable. Where do the Mag 7 go from here? 5 Trillion? 10 Trillion? 100 Trillion? a Trillion Trillion?
Point is when a company is notionally bigger financially than most countries it's probably not smart to expect high ROI from a dollar invested today
DCA - VONG , SOXQ , SCHD set it and forget it
many companies are laying off humans and attempting to insert AI. However the humans actually generate all the real demand and ebullence in the economy. This "future model" may have key issues, especially since there is so much fiat finance debt.
Seven? Today there are only the Fantastic Four. ;-)
Gotta love NordVPN
As a US investor, we balance the Mag 7 with Value and Dividend companies. SCHD is a good way to do this. Companies like Coca Cola, Pepsi, Home Depot, Lockheed Martin, Ford, General Electric, Walmart, Target, JPMorgan, etc, are American institutions that provide very stable and consistant returns regardless of the economy. I suggest my international peeps at least take a look a US value and dividend aristocrats.
I hit a pothole last night, it cost me a tyre and a wheel. No one wants to invest the British businesses that will create high value added jobs, so that fewer people have to reply on support and pay their taxes. Even people make future in the stock market, they have to share the same facility with the poor.
Got massacred on nvidia shorts
You can take Tesla off the list.
Was just at a dinner party in north of San Francisco. The hosts (and others) gave grief to 2 guests for driving their respective teslas because of Elon’s politics.
2 other guests complained about the problems they’ve been having with charging, repairing their non-Tesla EVs.
Several of us shared why we love our hybrid cars.
Everyone complained about how high our electric power bills are getting.
If the Democrats get back in power expect more financial punishment for those not buying EV cars.
California is not representative of the world. But yes EV only cars will cost Tesla.
Their prices are generally in line with earnings so not really overpriced.
Predicted future earnings , where everything goes perfect as predicted for few years to come. According to past earnings they're expensive.
@thetjt Well , they've been accurate for several years now so no reason that won't continue. These companies are growing into their prices.
Yes for NVDA but not for AAPL.
AAPL revenue has been relatively flat last 5Qs but P/E is still at 30. AMZN AWS growth has slowed but the stock keeps going up since they lay off more and more employees to increase cash flow.
How many employees can they lay off every quarter? TSLA margin and revenue have been declining but P/E is still at 44. NVDA is the only one where the earning growth is bigger than the price increase so NVDA is not expensive as long as they can maintain that revenue growth
@@johnristheanswer "so no reason that won't continue" - famous last words!
@MagicNash89 No different to people refusing to buy at all time highs. Funnily enough , there's been thousands of all time highs over the years.
Nifty fifty, what could go wrong. Oh they are mostly all gone. Oh that’s not going to happen this time.
I bought Nvidia shares in the middle feb and they are up 9% 😂 in just 2 weeks. I was watching CNBC ,at the time,and there were some analyst saying don't buy😂.
Apart from tesla theyve all peaked already
Rubbish
14:09 Surely an equal-weight index should be cheaper? There shouldn't be ANY "churn" as their relative movements over time within the S&P500 are ignored. £50,000 gets you £100 of each company and that's it forever, unless you buy more, sell up or a company is replaced in the index. Almost no causes of ongoing expenditure so fees should be even lower, no?
Technically, no. In a market cap weighted index, if stock no.5 rallies by 40% and the remaining 499 stocks don't move, the (market cap) fund does nothing. In an equal weighted index, it would be a forced seller of stock no.5 when it comes to rebalancing. Because of this the churn is higher as well as the transaction fees within the fund itself (buying and selling more).
Effectively what the equal weighting does is having a huge size tilt.
I'm not saying equal weighting is a bad thing, but if I were to tilt away from mega cap growth and still be globally diversified, I'd be looking at the Global Value Factor funds. But again, these are unsuitable for an average investor as value is a risk premium and many people struggle with market risk alone. Another option is to run two funds, a Target Date fund alongside a factor fund such as a market cap global mid/small cap fund.
You could also sink your teeth into the fang stocks.
This video is really late behind many other youtubers. Heard it all before. Get creative.