Few stocks have raised more controversy and debate lately than Apple Inc. (NASDAQ:AAPL), with the stratospheric rise and similarly devastating decline in its stock price over the past year. But if you’re considering whether to add Apple Inc. (NASDAQ:AAPL) stock to your portfolio, consider one key thing: Odds are, you already own plenty of Apple Inc. (NASDAQ:AAPL) stock, even if you don’t even realize it.
Why you can’t escape Apple Inc. (NASDAQ:AAPL) stock
The place where Apple Inc. (NASDAQ:AAPL) stock is hiding in millions of investors’ portfolios is in their holdings of exchange-traded funds and mutual funds. Just about everywhere you look, you’ll find fairly high concentrations of Apple Inc. (NASDAQ:AAPL) stock in those pooled investments. That’s because despite its recent decline, Apple still ranks in the top two companies in the U.S. stock market in terms of market capitalization, and that’s enough to give it plenty of weight in some of the most widely followed index investments in the financial markets.
Take a look at some of the investments that give millions of investors indirect exposure to Apple stock:
The widely held SPDR S&P 500 ETF Trust (NYSEARCA:SPY), with $130 billion in assets under management, has a 2.6% allocation to Apple. Put another way, the ETF owns 8.8 million shares of Apple stock, representing almost 1% of the tech giant’s total outstanding shares.
The tech-tracking PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) tracks the much less inclusive Nasdaq 100 index, which includes the largest non-financial companies traded on the Nasdaq exchange. There, Apple has an 11% allocation, with the ETF owning more than 9.3 million shares of Apple stock. Think of it this way: For every 100 shares of the ETF you own, you indirectly own almost two shares of Apple, along with shares of dozens of other companies.
Among index mutual funds, the story is much the same. The Vanguard 500 Index Fund Investor Class (MUTF:VFINX) owns 8.9 million shares of Apple, representing an almost 3% weighting in the SPDR S&P 500 ETF Trust (NYSEARCA:SPY)-tracking fund. The
Vanguard Total Stock Market Index Fund Investor Shares, meanwhile, is the biggest fund owner of Apple stock, with 13.1 million shares held.
Nor are these funds particularly unusual. Overall, Apple is one of the favorite holdings among institutional investors. Yahoo! Finance reports that almost 2,000 different institutions own Apple shares, with giants like State Street Corporation (NYSE:STT), Fidelity, BlackRock, Inc. (NYSE:BLK), and JPMorgan Chase & Co. (NYSE:JPM) among the top institutional holders of Apple stock.
Do you need to buy more Apple?
With so much Apple stock hidden in many investors’ portfolios, buying additional shares can leave individual investors dangerously overexposed to the tech giant even without investors being aware of it. With many financial advisors recommending that investors put no more than 5% of their money in a single stock, those who own ETFs or mutual funds with high concentrations of Apple among their holdings really shouldn’t add more shares separately if they want to maintain a highly diversified portfolio.
Of course, some investors will want to take on the risk of a concentrated position in the iDevice-maker’s stock, especially those who believe that Apple will confound skeptics and come out with a new set of innovative product offerings that will reinvigorate the company’s recently flagging growth. That’s one reason why you’ll find some additional shares of Apple in my portfolio, as well as the belief that the stock represents a good value even if growth never heats up again. But in terms of missing out entirely on an Apple rebound, most investors have nothing to worry about because of their already-extensive indirect holdings of the stock.
Always look through your fund holdings
The lesson for investors here is that if you own ETFs and mutual funds, you need to consider their holdings when evaluating your overall risk. The danger of owning more Apple Inc. (NASDAQ:AAPL) stock than you want or need is just one way in which failing to pay attention to what your funds are doing can burn you.
The article Looking at Apple Stock? Why Most Investors Don’t Need It originally appeared on Fool.com and is written by Dan Caplinger.
Fool contributor Dan Caplinger owns shares of Apple, both directly and indirectly. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.
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