This Friday, Your Portfolio Changes Forever

by Andrew Zatlin July 18, 2023 2:30 pm ET

Do you invest in the stock market? Contribute toward a 401(k)? Receive a pension?

If so, listen up: A major shift is going to have a direct, immediate impact on your portfolio.

Here's what you need to know.

For a transcript of this video, see below. This transcript has been lightly edited for length and clarity.

This Friday, Your Portfolio Changes Forever

Chances are, you missed this story in the headlines. But when I saw it, I couldn't believe it.

The Nasdaq 100 will undergo a significant rebalancing at the end of this week, thanks to a group of companies known as "The Magnificent Seven."

Now, that sentence may sound like a lot of mumbo jumbo. And you might be wondering:

What's the Nasdaq 100? Who are the Magnificent Seven? How does this impact me?

I'll answer all those questions for you. Let's dive in...

The Nasdaq 100

To set the stage, let's talk about the Nasdaq 100. This is an example of a stock market index, made up of about 100 of the biggest non-financial companies listed on the Nasdaq stock exchange.

In recent years, this index has significantly outperformed the S&P 500. Take a look:

Year-to-date, the S&P 500 is up 17%. The Nasdaq 100 is up 45%.

This success means a lot of investment managers look to this index. And a number of funds mirror the Nasdaq 100 — like QQQ, for example.

Trillions of dollars in the stock market are impacted by the Nasdaq 100. You probably have funds invested that rise and fall with this index. And there's a chance you don't even realize it. That's the thing about the Nasdaq 100...

Investing on Autopilot

Most investing that follows this index is done automatically. Every two weeks, you probably earn your paycheck and watch a set amount sail off into your investment account.

That money gets invested into different securities, likely including ones that follow the Nasdaq 100. It's a perfect example of passive investing – it's done completely on autopilot.

The Nasdaq 100 is at the center of the stock market universe. But while this index may contain 100 companies, only a handful are driving its moves.

Well, seven, to be precise...

The Magnificent Seven

Those companies are Amazon (AMZN), Apple (AAPL), Alphabet (GOOGL), Meta (META), Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA). They're often referred to as "The Magnificent Seven."

These seven stocks drive almost 60% of the total Nasdaq 100 holdings. In other words, for every dollar you put into funds that track this index, the majority goes into purchasing shares of big names like Apple and Microsoft.

So far, that may have been good news for your portfolio. But this concentration presents a lot of problems for the SEC. And now it's taking action. Here's what'll happen this Friday...

A Balancing Act

Essentially, the Nasdaq 100 will be rebalanced. Soon, fewer of your investment dollars will be allocated toward The Magnificent Seven and will instead go toward other companies.

Obviously, this isn't great news for the big guys. In fact, Apple's shares have already taken a 1% dip. But other companies in the Nasdaq 100 are poised to benefit.

If you're a Moneyball "Pro" subscriber, I'll reveal a way to potentially profit from the winners and losers of this shift with just a single investment.

We're in it to win it. Zatlin out.