When BATMMANN Turns Bad
Main Idea: With a new company added to the Magnificent 7, the urge of FOMO grows as well as the importance of diversifying outside of the BATMMAAN companies.
I love Batman.
The Dark Knight and The Dark Knight Rises are two of the greatest films of all time.
But wait—this isn’t an article about why the masked vigilante reigns supreme over all other superheroes. It’s about the Magnificent 7… plus one.
The Magnificent 7 refers to the top 7 companies within the S&P 500:
And now, the newest to join this elite group: Broadcom.
For the purpose of this article, it doesn’t matter what these companies do—you likely know that already.
What does matter, and what I want to focus on, is the growing overconcentration into just a handful of companies—often without investors even realizing it.
The Issue with BATMMAAN
“Invest in the S&P 500 and walk away.”
Ever heard that advice before?
While I’ve certainly heard and seen much worse, this approach still falls short—even when we’re talking only about investments.
(And I’ll always emphasize that investments are just one piece of a complete financial plan.)
That said, here are some key issues I see with investing solely in the S&P 500, whether it’s for your stock/bond mix or your entire portfolio (with Batman references of course):
Investing solely in the S&P 500 may seem simple, but the risks can’t be ignored—especially as markets evolve and concentration increases.
What do we do about all of this?
While none of this is a recommendation or financial advice, it’s important to be mindful of what you’re investing in—especially as markets continue to hit new highs regularly now.
NOBODY, myself included, can predict when a market correction (a fancy term for a drop in prices) will occur—but it will happen eventually.
Because of this, being well-diversified across companies, sectors, and even geographic regions that behave differently can be a smart strategy.
Diversification might mean investing in private equity, real estate, or even more alternative assets like private credit, collectibles, or commodities.
What’s right for you depends on your unique situation.
I don’t know you or your circumstances, but I encourage you to sit down with your advisor today to have this important conversation.
And most of all remember...Christopher Nolan's Batman series will never be touched by another director, nor will we be able to recreate the magic of that series.
You're going to want to rewatch that trilogy today if it's been awhile.
Until next time.
CONCLUSION
Follow Up to Read or Watch: Here's a cool site you can visit to see how much "weight" each company has in the S&P 500.
Action Item: Understand while things may be going great now with the S&P 500 and it's largest companies, it will not always be that way. Just like in bad times we must keep a level head and focus on the good times ahead, the same can be said for planning for bad times, now that we are currently in a "good" period.
My name is Jordan McFarland and I'm a CERTIFIED FINANCIAL PLANNER™ at SageSpring Wealth Partners in Dallas, TX.
My goal with these brief articles is not to make you an expert, but get you thinking about ways you can optimize your finances and get ahead for tomorrow.
If any questions or thoughts come up during your reading, you can email me at jordan.mcfarland@sagespring.com.
Unfortunately, I must keep these articles rather vanilla and short in order that I do not trip any compliance wires. I'd be happy to meet with you to hear about your specific goals when the time comes.
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