BACK TO THE BOUTIQUE INVESTOR BLOG Looking Beyond Market-Cap Weighted Indices Michael E. Schroer, CFA MANAGING PARTNER & CHIEF INVESTMENT OFFICER | RENAISSANCE INVESTMENT MANAGEMENT Mike Schroer, CFA, Chief Investment Officer at Renaissance Investment Management, discusses the concentration in market-cap weighted indices and their impact on the current environment. One of the more significant aspects of today’s market is the concentration of a relatively small number of companies in many stock market indices. Most stock market indices are capitalization-weighted, meaning that larger-sized companies, such as Apple, have a much larger percentage weight in the index than smaller-sized companies. Here, I talk about how competitive pressures, regulatory issues, and the inability to maintain strong growth rates in revenues and earnings can lead to the most popular stocks underperforming in the long term. The U.S. stock market has been top-heavy with few large companies, primarily in Tech, driving returns for several years. Now may be an especially good time to diversify away from concentrated indices and, instead, consider high quality, reasonably priced growth opportunities. LEARN MORE ABOUT DIVERSIFICATION Past performance is not a guarantee of future results. Diversification does not guarantee a profit or protect against a loss in declining markets. Investing involves risk, including possible loss of principal. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for a long term, especially during periods of downturns in the market. This does not constitute investment advice or an investment recommendation. This represents the views and opinions of Renaissance Investment Management. It does not constitute investment advice or an offer or solicitation to purchase or sell any security and is subject to change at any time due to changes in market or economic conditions. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader theme.