Apple’s Size Is A Double-Edged Sword

With a market capitalization higher than 493 of the S&P 500 companies combined, technology giant Apple Inc. (NASDAQ:AAPL) continues to provide me with a dilemma right now. The company’s size essentially requires its ownership in any market-cap-weighted fund. With capital inflows into exchange traded funds (ETFs) and other low-cost diversified funds rapidly increasing, Apple’s prevalence as a core portfolio staple of nearly every investor makes it a no-brainer for investors to hold.

On the other hand, the flip side of Apple being such a heavily-weighted component in so many portfolios is a heightened level of concentration risk within investor portfolios broadly. When a few stocks start accounting for the lion’s share of an index’s overall moves on a daily basis, the diversification reason for owning such an index is muted. Apple’s growth has become sacrosanct to an extent and is firmly built into the company’s stock price. The same can be said for many of the company’s peers and competitors. This can be problematic if growth slows to a degree investors did not anticipate in the near future.

Apple is truly a world-class company and has been a top pick of mine for years. That said, owning equities is inherently risky. (Despite TINA, there is no alternative trade in the reality we’re in right now). Staying cautious and investing in a slow and steady manner over a long period of time is the best way to take advantage of Apple’s incredible long-term upside.

Invest wisely, my friends.