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Big investors are favoring large-cap stocks for the rest of 2022 — maybe you should too

Big investors are favoring large-cap stocks for the rest of 2022 — maybe you should too

Institutional investors who dominate the stock market increasingly favor large-cap stocks as the end of year approaches — and therefore you should too. Many managers know they will receive a year-end bonus if they finish the year ahead of the S&P 500 (SPX) So if around this time of year they are ahead of that benchmark, they have a powerful incentive to start making their portfolios look increasingly like an S&P 500 index fund, thereby locking in their positive “alpha.” Since the S&P 500 is a cap-weighted index dominated by a couple dozen of the largest-cap stocks — including Apple (AAPL) Microsoft (MSFT) (MSFT) and Alphabet (GOOG) (GOOGL) — this means fund managers will more heavily weight those stocks and underweight small-cap stocks outside the index.