From Bespoke Research (hat tip to Big Picture Blog)

So, the top three industries in the index are: Technology (20.7%), Financials (15.7%) and Health Care (15.25%).

What I found more interesting is how these sector (or industry) weightings have changed over time. The charts below show how the sector weightings have changed over the past 26 years as the popularity of industries ebb and flow.

• So, for example, in looking at the Technology chart below, you can see that Technology companies peaked at over 1/3 of the S&P500 index during the bubble period in 1999 and 2000, only to revert back to its mean of about 15% of the index soon thereafter (that caused some pain!).
• Also, note how Financials took over leadership as the companies in that sector accounted for about 22% of the index before the housing crisis hit in 2007 which sent bank stocks down and the financial sector constituted about 8% of the index a few years later.

Questions for students:

• Which industries appear to be most overvalued or undervalued based on these charts?
• Do you have reasons that might explain the popularity or lack of popularity of any of these industries (e.g. energy prices, shift to mobile devices)?
• If you could invest in only one industry sector TODAY, which would you choose and why?
  • Be sure to let students know that their are mutual funds and ETFs that focus on given sectors if they want to make such bets.

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Be sure to check out this visualization of the S&P500 which your students will love!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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