00:00 – 00:45
Aaron Task
The 20 largest U.S. companies by market cap employ about 4.4 million Americans. Chances are you or someone you know works for one of these corporate giants. What if I told you there's a way you can make the 20 largest U.S. companies work for you? How? Stick around to find out. This is In The Know.
I’m Aaron Task and My guest for today’s episode is Rachel Aguirre, Head of US iShares Product at BlackRock. Rachel. Welcome.
So your role oversees the research and development of innovation and the commercialization of iShares ETFs. And we're here to discuss our latest offering, the iShares top 20 stocks ETF, symbol TOPT. So first things first what is TOPT?
00:46 – 1:48
Rachel Aguirre
Well, first of all, thanks for having me. So excited to be here. To answer your question, TOPT is the iShares Top 20 Stocks ETF. We like to refer to it by its ticker, TOPT. This fund seeks to track the investment result of an index comprised of the 20 largest U.S. companies by market capitalization within the S&P 500 index.
TOPT is designed to empower investors to access the performance of the biggest and some of the most successful companies in the U.S. Now, you may be new to investing, but you're probably familiar with the brands currently in the top 20, including Apple, Amazon, Meta, Johnson & Johnson and JPMorgan Chase, which collectively represent $25.5 trillion in market cap, almost equal to the size of the U.S. economy.
Now, these companies operate in more than 160 countries around the world and generated $623 billion of free cash flow in the past 12 months.
1:49 – 02:09
Aaron Task
Those are staggering numbers. Huge, as some people might say. But just Rachel, let's take a step back. For listeners who may be new to investing, we mentioned a couple of terms here just to define them. What is market cap? What's an index and what are the benefits or potential benefits, of investing in index funds?
2:09 – 3:54
Rachel Aguirre
Well, market capitalization or market cap is the dollar value of a company's total outstanding shares of public stock. If, for example, a company has 100 million shares of stock outstanding and it trades at $100 per share, its market cap would be $1 trillion.
Market capitalization is often used as a way to measure the size of a company, and as a way to differentiate between companies.
For instance, companies are typically categorized as being large, mid, or small cap based on their market capitalization.
Now, as for what is an index? In simple terms, you can think of an index as a way to measure something. So when it comes to investing, an index is simply a reflection of the price of a collection of stocks, bonds, commodities or other assets or even entire markets.
A lot of people hear reference to the Dow Jones Industrial Average, for example. That's an index commonly cited for how the market, quote unquote is doing. At the same time, a lot of professional investors oftentimes use the S&P 500 as a benchmark for how they're performing versus the market.
Index funds have a lot of advantages. They're simple, low cost ways to gain exposure to markets. Index investing really became ubiquitous alongside the rise of ETFs over the last several decades. And that powerful pairing of ETF and indexing has truly revolutionized how investors access the financial markets.
They've made investing more accessible, more affordable, and more convenient.
3:55 – 4:04
Aaron Task
Okay, so thank you for defining those terms. So why TOPT?
Why might an investor consider this product? And what advantages does it have to offer?
4:05 – 5:48
Rachel Aguirre
Well, there's a number of advantages, but two in particular that I would highlight.
The first is access. TOPT gives investors direct access to the performance of the 20 largest U.S. companies, allowing someone to harness the power of stocks that have a strong track record of growth over the long term.
The second thing is it's a simple way to start investing. TOPT is one-ticker solution that gives an investor exposure to a variety of large-cap stocks with no minimum investment, other than the price of the ETF itself.
If you were to instead purchase one share of each of the top 20 stocks individually, it would cost more than $7,000.1 So this is a simple way to get started investing with however much you're comfortable with.
Now, here's a fascinating stat to consider for anyone thinking about starting their investment journey. Now, we know many self-directed investors choose to get started by holding individual stocks. And while that can be one way to get started, it comes with its risks and challenges.
The US equity market over the past five years experienced a cumulative return of just over 100%.2
Pretty impressive. But over that same time period, nearly 38% of stocks — or over one in three stocks — lost money. And the average return of those stocks was a loss of 53%.3 So as an individual stockholder, it would be very possible to lose meaningfully in a winning market. Which really shows the importance of diversification in investing.
5:49 – 6:20
Aaron Task
Yes. And I can say from personal experience, I have been in some of those stocks that maybe didn't do so well even as the market was going up. And it's very frustrating. okay. So how does this work in practical terms? You mentioned before some of the companies that are currently in the top 20 Apple, Amazon, Meta, Johnson and Johnson, JP Morgan Chase, to name a few.
But I'm guessing if we went back five, ten, certainly 20 years, there would be a different group in the top 20. So how is TOPT, how is that going to stay current.
6:21 – 6:38
Rachel Aguirre
Well this is one of the things we love about this ETF. TOPT is dynamically rebalanced on a quarterly basis — the third Friday of March, June September and December. And that ensures that investors maintain their exposure to the 20 largest companies on a rolling basis.
6:39 – 6:49
Aaron Task
Right. So you're telling me I can get that single ticker access to the 20 largest U.S. companies by market cap, and it's professionally managed and dynamically rebalancing, meaning I don't have to do anything.
6:49
Rachel Aguirre
That's right!
6:50 – 6:54
Aaron Task
That sounds pretty good. That's something I'm glad to be in the know about. Rachel, thanks very much for joining us today.
6:55
Rachel Aguirre
Thanks for having me.
7:01 – 7:11
Announcer: (spoken disclosures)
Visit iShares.com to view a prospectus which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Investing involves risks, including possible loss of principal.
Underlying index weightings in the S&P 500 Top 20 Select Index for the companies mentioned are: Apple: 15.96%; Amazon: 4.56%; Meta: 4.82%; Johnson and Johnson: 2.23%; JP Morgan Chase: 3.39%. As of 09/23/24. Subject to change.
Footnotes:
1 Source: Bloomberg using share prices as of Sept. 24, 2024. The sum of purchasing one individual share of each of the top 20 members was $6,996.21.
2 Source: Morningstar with data from 9/1/2019-8/31/2024. Based on stocks in the S&P U.S. Total Market Index.
3 Source: Morningstar with data from 9/1/2019-8/31/2024. Based on stocks in the S&P U.S. Total Market Index.
Disclosures:
Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and the general securities market. Diversification and asset allocation may not protect against market risk or loss of principal.
Transactions in shares of ETFs may result in brokerage commissions and may generate tax consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.
Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance does not represent actual Fund performance. For actual fund performance, please visit www.iShares.com or www.blackrock.com.
This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.
The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by S&P Dow Jones Indices LLC, nor does this company make any representation regarding the advisability of investing in the Funds. BlackRock Investments, LLC is not affiliated with the company listed above.
© 2024 BlackRock, Inc. or its affiliates. All Rights Reserved. BLACKROCK and iSHARES are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.
