Investors are pouring money into highly concentrated yet poorly understood "cap-weighted" equity indices, putting them at risk of huge losses if financial markets plummet, according to Invesco CEO Martin Flanagan. The U.S. stock market has been on a tear this year, with the Dow Jones Industrial Average up more than 1,000 points in just three months. The 10 biggest ETFs in the US have raked in around $65bn in 2017 so far, with all of those cap-weighted.
Investors are pouring money into highly concentrated yet poorly understood "cap-weighted" equity indices, putting them at risk of huge losses if financial markets plummet, according to Invesco CEO Martin Flanagan. Investors believe that the indices are "safe and cheap", when in reality "you are ending up with a disproportionate amount of your portfolio in the biggest stocks", said Flanagan. The 10 biggest ETFs in the US have raked in around $65bn in 2017 so far, with all of those cap-weighted.