iShares Top 20 U.S. Stocks ETF

TOPT

Market cap $327M

Launched on October 23, 2024, the iShares Top 20 U.S. Stocks ETF (TOPT) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Growth segment of the US equity market.

Rob Isbitts from Sungarden Investors Club talks again to analysts Julia Ostian, Jack Bowman, and Kenio Fontes. Market risks are rising as valuations stretch, yield curves steepen, and concentration in mega-cap tech increases vulnerability.

The S&P 500 is acting more like a 20-50 stock index all the time. I think it's time investors take notice of that. While TOPT, an iShares ETF that launched last year, is a good way to investing in the 20 largest S&P 500 stocks, it is also a nice stock scouting tool. I introduce here some of my ongoing research into the topic of "do we really need to own a 500-stock index?"

I maintain my buy rating on iShares Top 20 U.S. Stocks ETF, as its focus on the largest U.S. stocks continues to deliver outperformance versus the S&P 500. TOPT's concentrated exposure to mega-cap tech and diversified large caps positions it for strong returns in bullish markets and resilience in downturns. The fund's low expense ratio, reasonable valuation, and accessible share price make it an attractive vehicle for high-risk tolerance investors seeking large-cap growth.

If you're interested in broad exposure to the Large Cap Growth segment of the US equity market, look no further than the iShares Top 20 U.S. Stocks ETF (TOPT), a passively managed exchange traded fund launched on 10/23/2024.

TOPT offers concentrated exposure to the U.S. equity market by picking the largest 20 companies based on market cap. While an aggressive approach like this may be justified in bull markets in general, current risks make the fund too risky to hold. Amid a weakening labor market and inflationary pressure threats, the current market optimism creates vulnerability for investors, and buying or adding to TOPT is not warranted.

The iShares Top 20 U.S. Stocks ETF offers concentrated exposure to the largest U.S. companies. TOPT has delivered strong performance thus far and has realized modestly higher levels of volatility than broad-based indexes. I am bullish on a number of TOPT's largest holdings.

iShares Top 20 U.S. Stocks ETF offers exposure to the 20 greatest S&P 500 companies, with a low expense ratio and moderate risk. The top 20 S&P 500 companies contributed 60% to the index's returns over the last five years, making TOPT an attractive investment. The recent market selloff presents a buying opportunity in TOPT, supported by robust earnings growth and attractive valuations in key sectors.

The TOPT ETF focuses exclusively on the top-20 U.S. companies by market cap, but it doesn't seem to offer much tangible benefit. The strategy used by this fund could result in regrettable removals of large-cap stocks that undergo short-term dips. TOPT's heavy weighting in a few stocks and sectors increases risk, and investors can easily replicate its strategy without the added costs.

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