What a week it’s been in markets. Between US earnings season, yen intervention, and a complete saga unfolding between AI investor Leopold Aschenbrenner and Citadel, it almost feels like we’re living through our own modern Odyssey.
Admittedly, I haven’t watched Christopher Nolan’s new cinematic rendition. However, Wolfgang Petersen’s Troy is one of my all-time favourite movies.
Personally, the Trojan Horse has long stood as a symbolic lesson of the danger in unreservedly trusting appearances.
Whether intentional or unintentional, a false sense of security can pose a serious threat. Just ask the people of Troy.
The trick is to see past the illusion.
See the best-performing index so far this year is the South Korean KOSPI index, up more than 45% year-to-date. This index is comprised of 200 companies. Large returns in less than a year and diversification, sounds like you can have your cake and eat it too.
That’s the thing… The diversification of an index fund can be something of an illusion. The same KOSPI index filled with 200 companies has 66% of its value tied to just two stocks. While not as severe, almost a quarter of the S&P 500’s value is connected to two companies.
This isn’t to say that index funds or ETFs should be avoided. It just means looking inside the horse before you wheel it into your portfolio.
This week’s Market Insights goes over how you might do that.
Sincerely,
Mitchell Lawler, Senior Investment Editor
