You Probably Own Less Than You Think You Do
Every week, Sharesies publishes the ten investments bought by the most New Zealanders. In the week to 17 August, number one was a fund that tracks the S&P 500. Number seven was a different fund that also tracks the S&P 500. Number ten was Apple.
Which is funny, because Apple is already the second biggest thing inside the fund at number one.
So a lot of people bought Apple twice that week and only noticed once.
None of this is a mistake, exactly. Buy the index, don't pick stocks, own 500 companies instead of one. It's the advice everyone gives, and it's good advice. I've given it myself.
But I went and looked at what's actually inside that fund, and it owns a lot less than 500 companies' worth of anything.
A trolley full of potatoes
Think of the S&P 500 as a supermarket trolley. Five hundred items, looks impressively varied, until you notice it's chips, wedges, mash and hash browns.
Almost 40 cents in every dollar of that fund sits in one sector: information technology. And it's worse than it looks, because of how companies get filed. Alphabet and Meta count as communication services. Amazon and Tesla count as consumer discretionary. Alphabet is shelved under communications roughly the way a hash brown is shelved under breakfast.
Then look at the top of the trolley. The ten largest companies make up nearly two fifths of the whole fund. Put $100 in and about $7 of it goes to Apple alone.
This isn't normal, either. S&P's own researchers describe the current concentration as a level not seen since the mid-1960s.
So yes, it holds 500 companies. Most of your money is in a handful of them, and most of that handful does the same thing.
It's also just one country
Here's the other half. The S&P 500 is American, and while the US is the biggest share market on earth, it isn't the earth.
American companies are worth roughly two thirds of all the listed shares in the world. Which leaves a whole other third, across Japan, the UK, Taiwan, Europe and everywhere else, that an S&P 500 fund doesn't touch.
Nobody's saying two thirds is the wrong amount to hold. The question is whether you picked all of it on purpose.
And fair's fair: four of the other funds in that top ten last week covered Asia, Europe, emerging markets and Australia. Plenty of people are already doing this deliberately.
Now go and check your KiwiSaver
This is the part almost nobody looks at.
Every KiwiSaver fund has to publish its ten biggest holdings every three months. I went through the growth funds at every big provider. Apple is in the top ten of nearly all of them.
So if you own an S&P 500 fund and you've got a KiwiSaver growth fund, that's Apple twice. Buy a few Apple shares directly and you're at three. Three separate decisions, one company, and you never chose it three times on purpose.
It gets better. ANZ's growth fund holds an S&P 500 ETF as one of its ten biggest positions. An ETF, by the way, is just a fund you buy and sell like a share. So buy an S&P 500 tracker while you're in a fund like that and you haven't diversified. You've bought the identical thing twice.
And the single biggest holding in Westpac's default KiwiSaver fund isn't a New Zealand company. It's Nvidia, a chip maker most of us couldn't have named five years ago. If you've never once opened your KiwiSaver app or picked a fund, that's still your largest single share.
There's a twist running the other way, though. Across all of KiwiSaver, about a quarter of the money in shares sits in New Zealand companies, while New Zealand is a rounding error of the world's share markets. So plenty of us are over-invested in tiny New Zealand and over-invested in giant US tech at once. Two opposite mistakes, one portfolio.
Why spreading out actually matters
The best argument for owning everything comes from a researcher called Hendrik Bessembinder, who looked at every share ever listed in America. More than half of them did worse over their lifetimes than a plain government bond. Effectively all of the market's gains came from about 4% of companies.
You are not going to pick that 4%. Almost nobody does it reliably. Owning the whole market is simply how you make sure the 4% is in there somewhere.
That logic doesn't stop at shares. Bonds, property, gold and commodities all behave differently from each other and from the S&P 500, which is exactly why most funds hold more than one kind of thing.
The good news is that it's cheap
Spreading out wider doesn't cost you more. Compare Kernel's S&P 500 fund with Simplicity's global share fund, which holds thousands of companies across dozens of countries: the global one is the cheaper of the two. Broader and cheaper.
So what should you actually do
Go and look. That's the whole ask.
Open your KiwiSaver fund's latest quarterly update and read the ten biggest holdings. Then open whatever you own on Sharesies and find its sector breakdown. Ten minutes, and hardly anyone ever bothers.
You might decide you're happy being heavily weighted towards US tech. That's perfectly defensible, and it's been a very good decade for that bet. But there's a real difference between choosing a concentrated portfolio and ending up with one because it was the default, or because it's what the internet told you to buy.
Your first $100 was never really about the returns. It's tuition. And the most useful thing to learn early is what you actually own.
Opinion by Callum Maxwell