It is January. 27, Nafidia (Nasdaq: nvda) 17 % decreased, erasing more than $ 590 billion from the maximum market. The largest market destruction was for a day for a company in the history of the US stock market.
while Growth Recovered nearly half of those losses the next day, there are still lessons that must be learned from this historical market event.
Let’s dive into the importance of selling, the risks it offers, and how you can put your wallet in response to these risks.
Despite the massive clouds in Nafidia, Broadcom (NASDAQ: AVGO)and Taiwan semiconductorsAnd other chips, the sale of the sale was somewhat isolated.
The next graph shows the 12 largest S & P 500 (Snpindex: ^Gspc) Ingredients for the maximum market. Taiwan SemiDuctor is photographing from the market head perspective, but it is excluded from the graph because it is not in the S&P 500.
As you can see, like technology companies such as apple and Dead I enjoyed strong gains, as did the other industry leaders Wal Mart and Berkshire Hathaway. In fact, and Dow Jon’s industrial average (Djindices: ^DJI) Earn 0.7 % a day. However, the Invesco QQQ Trust (Nasdaq: QQQ)It is an ETF (ETF) box that tracks NASDAQ-100, decreased by 2.9 %. the Vanguard S & P 500 ETF (NYSEMKT: Trip) Likewise, the S&P 500 is tracked, and decreased by 1.4 %.
Despite the gains of the multiple securities market sectors, not to mention many individual technology shares, the S&P 500 and NASDAQ-100 still decreases sharply on that day because of the importance of large value chips like NVIDIA.
You can determine the impact of the individual stock on the index (or ETF that follows) by hitting the weight of its wallet by moving at the share price.
For example, NVIDIA constitutes about 7.5 % of INVSCO QQQ and 6.6 % of Vanguard S & P 500 ETF. Meanwhile, Broadcom represents 4.0 % and 2.2 % of the holdings in these two traded investment funds, respectively. Looking at its double losses for one day on January 27, these two companies alone reduced the Investco QQq 2.0 % while the Vanguard S & P 500 to 1.5 %. In other words, two stocks of MegacAP only formed the largest part of the price movement of these funds.
The sale in NVIDIA and Broadcom shows the risk of the upper market. As this perception may be, it is also a reminder of the importance of knowing the formation of the index box before you invest in it, including standards such as S&P 500 and NASDAQ-100. However, there are ways to counter the risk of focus.
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