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S&P 500: Top 10 Stocks

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You can try this one at home. Ask any investor you know how to calculate a company’s market cap and chances are you’ll be met with a blank stare.

A company’s market cap is its shares outstanding multiplied by its stock price. It amazes me how such an influential calculation is overlooked and not understood. The popular S&P 500 and Nasdaq indices are both market cap weighted yet investors don’t know what that means.

The larger the market cap, the larger the influence a particular stock will have on the direction of the index. The top-10 stocks in the S&P 500 and the Nasdaq have a huge impact on overall returns.

Take a look at the two tables below for the top-10 stocks by market cap for the Nasdaq and S&P 500. The top-10 stocks comprise 34.7% and 18.7% of the total market cap for their respective indices. That’s a huge influence by one group over an index that’s supposedly diversified.

It’s incredible how many investors let market cap run the show.

A different approach is to focus on dividends. An even better approach is to look for companies with at least 10-years of dividend increases. We do this with our Retirement Compounders common stock program. There’s a certain peace of mind gained from getting cold hard cash from a company even in rough years like this one and 2008, for example.

When I scan the list of names in the top-10 of the S&P 500 and the Nasdaq many of them haven’t even been a public company for ten years, never mind paying a dividend or increasing their dividend.

Don’t let market cap ruin your portfolio. Focus on what’s important to you. Getting paid a dividend to be invested in this market is a simple calculation everyone can understand.

market cap tables

Click to enlarge.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.