S&P sectors are changing

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div
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S&P sectors are changing

Post by div » Fri Sep 21, 2018 9:44 am

S&P 500 sectors are changing on Monday to reduce weightage of tech
https://www.cnbc.com/amp/2018/09/21/on- ... -move.html
Last edited by div on Fri Sep 21, 2018 4:14 pm, edited 1 time in total.

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ReformedSpender
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Re: S&P sectors are changing

Post by ReformedSpender » Fri Sep 21, 2018 10:33 am

div wrote:
Fri Sep 21, 2018 9:44 am
S&P 500 sectors are changing on Monday to reduce weight age of tech
https://www.cnbc.com/amp/2018/09/21/on- ... -move.html
"Investors who use passive index funds and ETFs are the most exposed to the big tech-stock and sector moves."

huh :confused
Market history shows that when there's economic blue sky, future returns are low, and when the economy is on the skids, future returns are high. The best fishing is done in the most stormy waters.

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JoMoney
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Re: S&P sectors are changing

Post by JoMoney » Fri Sep 21, 2018 10:35 am

ReformedSpender wrote:
Fri Sep 21, 2018 10:33 am
div wrote:
Fri Sep 21, 2018 9:44 am
S&P 500 sectors are changing on Monday to reduce weight age of tech
https://www.cnbc.com/amp/2018/09/21/on- ... -move.html
"Investors who use passive index funds and ETFs are the most exposed to the big tech-stock and sector moves."

huh :confused
People who use sector "index" funds will be impacted... not broad market index funds.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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nisiprius
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Re: S&P sectors are changing

Post by nisiprius » Fri Sep 21, 2018 10:43 am

And yet it is a common misunderstanding. The financial press reported in 2017, when they decided to elevate REITs into their own sector, that changes in the sector percentages within in the S&P index were going to cause problems for S&P 500 index funds.

The real question is why anybody would change anything in any portfolio just because of an arbitrary change in classification. Nothing has changed in the real world, it's just like deciding that Pluto should not be called a "planet." Can you imagine NASA saying "Oh, let's not bother with the New Horizons mission to Pluto because it's not a planet any more?" Nothing changed in the real world when they decided that Baltimore orioles were the same species as Northern orioles, and nothing happened when they decided that they were different after all. The orioles didn't care, they didn't change their singing or breeding habits.

Of course, issues for narrowly focused sector index funds will be seized upon and used as a stick with which to beat passive investing. "Communications sector index ETFs hit a pothole, therefore nobody should use total market stock index funds..."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

dumbmoney
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Re: S&P sectors are changing

Post by dumbmoney » Fri Sep 21, 2018 11:00 am

This is good news for people who worry about sector weights. You are now more diversified, without having to do anything. :-)
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JoMoney
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Re: S&P sectors are changing

Post by JoMoney » Fri Sep 21, 2018 11:17 am

Maybe it will make the S&P sector weighting look more like Total Stock Market on Vanguard's page.
Because S&P is classified using GICS, when you compare it to TSM (which is measured using ICB sectors) on Vanguard's web page it looks like S&P has more tech in it... but when you use the same sector classification system (like when looking on Morningstar) they're the same.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

herennow
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Re: S&P sectors are changing

Post by herennow » Fri Sep 21, 2018 11:27 am

Can someone explain how this impacts tech sector ETFs (VGT, FTEC, XLK) ? Why is this being done? Does this impact Nasdaq in any way?

Valuethinker
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Re: S&P sectors are changing

Post by Valuethinker » Fri Sep 21, 2018 11:28 am

nisiprius wrote:
Fri Sep 21, 2018 10:43 am
And yet it is a common misunderstanding. The financial press reported in 2017, when they decided to elevate REITs into their own sector, that changes in the sector percentages within in the S&P index were going to cause problems for S&P 500 index funds.

The real question is why anybody would change anything in any portfolio just because of an arbitrary change in classification. Nothing has changed in the real world, it's just like deciding that Pluto should not be called a "planet." Can you imagine NASA saying "Oh, let's not bother with the New Horizons mission to Pluto because it's not a planet any more?"
Pluto is a planet - comes the revolution Comrades, we shall execute those responsible for this crime against Reason ;-).

(Apparently "Quarternary" period only survives because of a coup by a group of geologists who didn't want something that they had had spent their careers studying, being abolished. This is all in the context of how it will be officially decided if we have indeed exited the Holocene, and entered the Anthropocene.

https://www.amazon.com/Human-Planet-How ... 0300232179

great book.)
Nothing changed in the real world when they decided that Baltimore orioles were the same species as Northern orioles, and nothing happened when they decided that they were different after all. The orioles didn't care, they didn't change their singing or breeding habits.
Is that American or National League?
Of course, issues for narrowly focused sector index funds will be seized upon and used as a stick with which to beat passive investing. "Communications sector index ETFs hit a pothole, therefore nobody should use total market stock index funds..."

Monster99
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Re: S&P sectors are changing

Post by Monster99 » Fri Sep 21, 2018 7:28 pm

Valuethinker wrote:
Fri Sep 21, 2018 11:28 am
nisiprius wrote:
Fri Sep 21, 2018 10:43 am
And yet it is a common misunderstanding. The financial press reported in 2017, when they decided to elevate REITs into their own sector, that changes in the sector percentages within in the S&P index were going to cause problems for S&P 500 index funds.

The real question is why anybody would change anything in any portfolio just because of an arbitrary change in classification. Nothing has changed in the real world, it's just like deciding that Pluto should not be called a "planet." Can you imagine NASA saying "Oh, let's not bother with the New Horizons mission to Pluto because it's not a planet any more?"
Pluto is a planet - comes the revolution Comrades, we shall execute those responsible for this crime against Reason ;-).

(Apparently "Quarternary" period only survives because of a coup by a group of geologists who didn't want something that they had had spent their careers studying, being abolished. This is all in the context of how it will be officially decided if we have indeed exited the Holocene, and entered the Anthropocene.

https://www.amazon.com/Human-Planet-How ... 0300232179

great book.)
Nothing changed in the real world when they decided that Baltimore orioles were the same species as Northern orioles, and nothing happened when they decided that they were different after all. The orioles didn't care, they didn't change their singing or breeding habits.
Is that American or National League?
Of course, issues for narrowly focused sector index funds will be seized upon and used as a stick with which to beat passive investing. "Communications sector index ETFs hit a pothole, therefore nobody should use total market stock index funds..."
+1 Nice! :happy

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