Comment by collinmcnulty
10 hours ago
I don’t think this is correct. Gains historically accrue to a small number of companies in a given time window. If you buy all the grocery stores, you’re exposed only to sector risk, if you pick one or two, you’re also exposed to the risk those companies don’t contain the “winners”.
I suspect the number of picks you would need is surprisingly small to reach high parity with the S&P.
If you don’t pick the right grocery company, you have a shot at picking the right telecommunications company. You pick fewer winners, but you’re also picking fewer losers.
The real reason to do this is because you want to avoid specific companies that are inside the index. You would only do this if you felt confident in your ability to avoid investing a lot of capital in losers. Even if you’re great at avoiding the telecommunications loser, you might be worse than average at avoiding the loser in other sectors.