Nvidia's surge reveals a pitfall of passive investing: Morning Brief
How does the Technology Select Sector SPDR Fund's performance compare to its benchmark?
The Technology Select Sector SPDR Fund (XLK) is underperforming its tech sector benchmark by over 10 percentage points this year. This is due to the fund's diversification approach and regulations that limit the weight of individual stocks, causing it to not fully capture the gains of top-performing tech companies like Nvidia, Apple, and Microsoft.
What is the 2024 return percentage for Nvidia as reported?
Nvidia's 2024 return percentage is close to 175%, as it notched its 43rd record closing high on Tuesday. The company's surge reveals a pitfall of passive investing, as many passive investors relying on mutual funds and ETFs have not been able to fully participate in these gains.
What is the current weighting of Nvidia in the XLK ETF?
The current weighting of Nvidia in the XLK ETF is 5.9%. However, after a rebalance, it is set to increase to 21.1%, while Apple's weight will drop from 22% to 4.5%. This change is due to Nvidia's significant surge in value, which has pushed it past Apple in market capitalization.