Stock index performances can be misleading because of the power law – a small proportion of the stocks determine majority of the index performance. Our brains are not good at deciphering non-linear math and would easily assume that a stock was up 5% on average when an index was up by 5%. This is very far from reality. The first power law effect we see is that, the largest 500 out of 4,000 stocks represent 80% of the U.S. stock market capitalisation. The second observable power law is that, just 5 stocks in S&P 500 took up 21% of the index weight (~4% each), while 495 stocks share the remaining 79% (~0.16% each). The S&P 500 index is down 8.7% year-to-date (as of 21 May 2020) but it isn’t indicative of how the 500 component stocks have performed. Even at the sector level, you can see a large disparity between

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