Diversification Today

Here’s Why You Don’t Pile Into One Name

David B. Armstrong, CFA Weekly Market Commentary

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I remember 1999. People thought you could do no wrong, unless portfolio managers refused to own the massively overvalued tech stocks.

Everyone was a genius.

Then everyone learned a lesson.

Fast forward to last Thursday.  Investors who over-weighted an internet darling learned what happens when management lowers expectations for future revenue and profits.  Companies lower expectations all the time and we hear about it on the news.  But not 20% in a day…not $119b like Facebook (FB).

Facebook

(Chart: Bespoke)

People lost their minds in 1987 when the market crashed over 20% in one day.

If the market lost 20% last Thursday people would be FREAKING OUT!  Yet the S&P 500 ended the week in positive territory.

Why?

The answer resides in the very name of the “S&P 500” index.  Or more specifically, “500”.

For those of you who do not understand the reference made in the MEME, I leave you with this video.

Keep looking forward,

Dave

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About the Author
David B. Armstrong, CFA

David B. Armstrong, CFA

David B. Armstrong, CFA, is a President and Co-Founder of Monument Wealth Management. Along with his role as the firm’s chief investment strategist and portfolio manager, Armstrong is viewed as an industry leader in several areas including innovative practice management, discretionary asset management, digital marketing and social media. Dave is the writer of Monument Wealth Management's weekly "Off the Wall" Financial Blog and Market Commentary, and is frequently sought after by journalists and event coordinators. Visit his full biography here.

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