It’s a Stock (And Niche ETF!) Picker’s Market

2023 was a great year for the stock market.

But it was an epic year for a handful of select stocks.

The “magnificent seven,” Amazon, Alphabet, Apple, Meta, Microsoft, Nvidia, and Tesla, soared 112% (equally weighting each). They outperformed both the SPDR S&P 500 ETF Trust (SPY), which is weighted by market cap, and the Invesco S&P 500 Equal Weight ETF (RSP), which weights each stock equally.

This illustrates the benefit of holding the right stocks, as you can see in the chart below. Concentration can lead to outperformance, if you get the big idea right. That’s easier said than done.

magnificent seven

To get the big idea right, I believe you should invest in and around dominant changes, megatrends, or what I call themes. Get the most important themes right and you have a framework for understanding the world and how to invest in it. That framework will help you avoid second guessing, wondering if you’re in the right investments (and perhaps exiting at the wrong time). It will also help you avoid the wrong stocks.