For many Americans, 401(k) investment plans may as well be written in another language. Aside from the general idea of equity funds, mutual funds, bond funds and relative strategies and risks, many 401(k) account holders may have no idea which stocks are in their plan and how much they own. Mutual funds and exchange-traded funds, known as ETFs, are popular 401(k) investments because these investments provide diversification. But some of the most popular funds have surprisingly similar stock holdings. Here’s a look at nine stocks that are likely overrepresented in your 401(k) account.
Apple (ticker: AAPL)
Any mutual fund or ETF that is market-cap weighted will have the world’s only $1 trillion public company as the top holding. The two most common 401(k) mutual funds – the Vanguard Institutional Index I (VINIX) and the Fidelity 500 Index Fund Investor Class (FUSEX) – have Apple stock as their largest stock holding. The SPDR S&P 500 Index Fund (SPY) and the iShares Core S&P 500 ETF (IVV), the two largest ETFs, also have AAPL in the top position. In each of these four funds, AAPL represents between 4 and 4.2 percent total weighting.
Microsoft Corp. (MSFT)
Microsoft is closely behind Apple among stocks held in these four popular 401(k) funds. With its $857 billion market cap, Microsoft is the second-largest company in the S&P 500 index and represents around a 3.5 percent weighting in each of these four funds. MSFT will also be heavily weighted in any technology-specific funds or funds focusing on high-growth stocks. Microsoft’s 1.6 percent dividend yield also means it’s heavily weighed in dividend funds and often included in 401(k) plans.
Amazon.com (AMZN)
Amazon has taken over the retail world and the cloud computing world, and it’s likely taking over your 401(k). Amazon’s $850 billion market cap has earned it a 3 to 3.2 percent weighting in each of the four largest mutual funds and ETFs, but its staggering growth record means it may soon challenge Apple as the most heavily weighted fund holding. Over the past three years, Apple’s market cap has…
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