Wow, iShares OEF ETF Holds 11% in One Single Stock

Core Idea - The iShares S&P 100 ETF (OEF) provides concentrated exposure to the largest companies in America, particularly in the technology sector, appealing to investors who favor growth and are willing to accept the associated risks [1][2]. Performance and Structure - OEF tracks the S&P 100, focusing on capital appreciation from dominant businesses, with technology making up nearly 40% of the portfolio and communication services and consumer discretionary accounting for an additional 25% [2]. - Over the past five years, OEF's heavy allocation to mega-cap technology has resulted in substantial gains, effectively doubling the portfolio's value, with the top three holdings comprising 28% of total assets [3]. - The fund has a competitive expense ratio of 0.20% and a 25-year track record, making it a stable choice for long-term investors [4]. Portfolio Fit - OEF serves as a core holding for investors seeking large-cap U.S. equity exposure with a growth focus, providing modest income through a quarterly dividend structure with a current yield of 0.86% [4]. - It is suitable for tax-advantaged accounts due to its low 4% turnover rate, enhancing tax efficiency, but is less appropriate as a sole equity holding due to sector concentration [5]. Risks and Vulnerabilities - The concentration strategy that drives OEF's performance also introduces vulnerability; significant sell-offs in mega-cap tech can adversely affect returns, particularly given that NVIDIA alone represents nearly 11% of the fund's assets [6]. - OEF has minimal exposure to defensive sectors, with utilities and materials making up only 1.3% of the portfolio, which can exacerbate declines during market downturns [7]. - Although OEF has historically outperformed the S&P 500, it can lag during certain periods, as evidenced by a year-to-date decline of 2.2% compared to the SPDR S&P 500 ETF Trust's 0.4% decline [8].