Quoted By:
>Chamath has said:
>Average Americans buy S&P 500 index ETFs, in part, because Buffett told them to. They were told they would pay very little and get diversification in the 500 best companies on earth to ride out storms.
>But as concentrations rise in a very small percentage of those stocks, the risks don’t fall. They rise. If the indices don’t cap the max percentage of any one stock, you essentially are holding a direct bet on that ONE company. In this case, see that when you buy an index of 500 companies, you’re really buying 10 companies with 490 others thrown in.
>If there is any market volatility, the lack of diversification could cause massive impairment.
