Apple continues to perform well of the Nasdaq, soaring ahead and widening the gap between itself and the second largest US company, Exxon. Apple’s Market Cap is currently $559-billion compared to Exxon’s $408.78-billion. In the past twelve months Apple’s shares have soared 48 per cent, hitting $617.62 last Wednesday. However, an overreliance on Apple stock could be a risk for retirement plans.
While investors continue to be able to make a fast buck from Apple’s shares, it may not be such good news for retirement funds as a dramatic fall in Apple’s shares may lead to heavy losses in retirement accounts that are relying heavily on Apple’s stock. (More below…)
Fund managers have seen the value of their investment in Apple balloon to such an extent that Apple shares now account for a significant percentage of a client’s investment. According to a Reuters report, fund makers are taking a risk, concentrating their bets on Apple, rather than spreading the risk across a more varied investment.
This is known as a Concentrated Stake and it undercuts the benefits of diversification and can make funds riskier because they are tied to the performance of a single company, explains the report.
While unlikely, a dramatic fall in Apple's shares would quickly ripple across the retirement accounts of millions of investors who have their money invested in such funds.
Standard & Poor's Capital IQ senior fund analyst Todd Rosenbluth told Reuters: "It adds to the risk profile of a fund to have a significant stake in one stock because it makes them more susceptible to bad news on one or two stocks and they won't be able to cushion the blow with diversification."