Almost everyone owns an index fund. Almost no one has looked closely at what is actually inside it. In the latest episode of Quarter Over Quarter, Tom Moran and Don Drury open up the S&P 500 and ask a question that catches a lot of successful investors off guard: is the fund you bought for its diversification quietly turning into a bet on a handful of stocks?
Watch or listen below — it runs about 15 minutes, and the first two are worth it on their own.
In this episode
Tom and Don make the case that exchange-traded funds are a genuinely good tool — low-cost, simple, and the right core holding for most investors. Then they turn to why some higher net worth investors start to look further: concentration that builds inside a cap-weighted index, the flexibility that comes from owning individual securities, and the tax and estate planning moves a single fund share simply cannot make. It is not an argument against ETFs. It is a conversation about fit.
The moment that stops people
“Roughly 40% of the S&P 500 now sits in just ten companies. You can own hundreds of stocks and still be far less diversified than you think.”
They are not exaggerating for effect. The ten largest companies in the S&P 500 now make up close to 40% to 41% of the entire index — nearly double their share a decade ago — according to J.P. Morgan Asset Management, a trend RBC Wealth Management has called “the great narrowing.” Those same ten names produce only about a third of the index’s earnings, a gap Tom and Don dig into on air.
Where the conversation goes next
From there, the hosts get into the part that matters most for larger, taxable portfolios: what you can do when you own the individual pieces rather than a single bundled share.
“When you own the securities directly, you have choices a fund share can’t give you — which lots to harvest, which shares to gift, what to hand down. That flexibility is where a lot of the value lives.”
Tax-loss harvesting is the example they return to. Independent Vanguard research has estimated the potential after-tax benefit — sometimes called “tax alpha” — at roughly 0.47% to 1.27% per year. That figure is a projection based on historical data and specific assumptions, and actual results vary with each portfolio, tax situation, and market environment; it is not a prediction of any individual’s outcome. In the episode, Tom and Don walk through how that flexibility connects to charitable giving and estate planning as well.
What you’ll take away
- Why “diversified” and “broad market exposure” are not always the same thing
- How a cap-weighted index concentrates on its own, without you making a single trade
- What owning individual securities makes possible for taxes, gifting, and estate planning
- How to think about tracking an index versus tracking your own goals
Watch & Listen
Catch the full conversation with Tom Moran and Don Drury on Quarter Over Quarter, and subscribe so you never miss an episode.
Watch on YouTube: Why High Net Worth Investors Are Moving Beyond ETFs
Listen on Apple Podcasts: Quarter Over Quarter on Apple Podcasts
Listen on Spotify: Quarter Over Quarter | Podcast on Spotify
Prefer to talk it through with someone? The team at Moran Wealth Management® is at 239-920-4440 or info@moranwm.com.