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- Title
Navigating the Skew: Strategies for Facing the Underperforming Majority.
- Authors
Berkow, Kathryn S.; Jakotowicz, Richard
- Abstract
The most popular exchange-traded fund (ETF) in the world, SPY, represents the largest 500 companies in the United States. In 2020, SPY had total returns of 18.35 percent, despite the economic slowdown created by COVID-19. Facebook, Apple, Amazon, Netflix, Google, and Microsoft contributed 10.8 percent of SPY's 18.35 percent--over half of the index return. Simultaneously, 65 percent of SPY's constituent stocks performed worse than the index; it was more probable for an investor to randomly pick a losing stock than a winning stock. This phenomenon is not unusual. The objective of this article is to understand the probability of randomly selecting a winning stock and how it may influence an investor's choice to manage their portfolio actively, passively, or a blend of the two.
- Publication
Journal of Financial Service Professionals, 2021, Vol 75, Issue 6, p62
- ISSN
1537-1816
- Publication type
Academic Journal