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And for the average investor, this has proven to be a solid bet over time.
But things may be changing for the so-called diversified S&P 500 index.
But the truth of the matter is a bit different.
This means that the bigger the company, the more weight it carries in the market.
Its also a completely different creature than the Dow Jones Industrial Average, which is still price-weighted.
This means that stocks in the widely quoted Dow are weighted by their share price.
Is Market Cap Weighting an Issue for the S&P 500?
The general concept of market cap weighting isnt really an issue.
The multiyear rally in tech stocks, however, has become one.
Is the S&P 500 Really Diversified?
That means just 10 stocks were responsible for more than one-third of the entire indexs performance.
And the top 20 stocks accounted for more than 46% of the indexs weight, according toSlickcharts.
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