I was curious to know how much of the total market capitalization the largest companies represented. An easy way to do this (even if it might be a tiny bit off) was to use the Vanguard Total Market fund ($VTI), so this is what I did (I also decided to look at the % in the S&P 500 also, $VOO).
Apple 6.2% of total market and 7.1% of S&P 500.
Microsoft 6.2% and 7.1%
Alphabet 3.3% and 3.9%
Amazon 3% and 3.4%
Nvidia 2.3% and 2.9%
Meta 1.6% and 1.9%
Berkshire Hathaway 1.5% and 1.8%
Tesla 1.3% and 1.6%
UnitedHealth Group 1.2% and 1.4%
In general investing in low cost index funds (like Vanguard’s index funds) is a very sensible strategy. I personally invest mostly in individual stocks. I see stocks such as Microsoft and Costco that are attractive businesses to invest in but the stocks are so costly I hesitate to invest. In addition, I already am over-invested in mega-cap companies (my largest holdings are Apple, Alphabet and Amazon, about 36% of portfolio). So avoiding other mega-caps makes some sense to me. Of course, I have missed out on large gains by Microsoft over the years by not investing in it.
One reason I decided to look at this was to get a baseline of a total market portfolio. One of the things I am considering is say buying a bit of Microsoft but still underweight that investment. Say I was 2% invested in Microsoft that would still leave me “under-invested” in Microsoft. I have been still some of Apple and Alphabet over the last few years (in pretty small amounts). I have invested those proceeds mainly in smaller, fast growing companies or good businesses that have stocks trading at good values. As I sell more of Apple and Alphabet I may consider buying some other megacaps. The one I have bought a little bit of is Berkshire Hathaway.
10 year returns Apple (up 1.068%), Alphabet (up 424%), Amazon (up 693%) and Microsoft (up 1,090%)
FYI, the total USA market index fund (VTI) was up 187% for the same 10 year period and the S&P 500 index fund (VTI) was up 204%.
Related: The 20 Most Valuable Companies in the World (May 2017) – Stock Market Capitalization by Country from 1990 to 2010 – Stock Market Capitalization by Country from 2000 to 2016 – The 20 Most Valuable Companies in the World (October 2014)