Got diversification? Access the 20 biggest U.S. stocks

It's been a good time to own stocks. Major indexes like the Dow Jones Industrial Average and S&P 500 have produced a string of record closes this year, and a broad measure of U.S. equities has more than doubled in the past five years.² But picking stocks isn’t easy and the harsh reality is nearly 38% of publicly traded companies in the S&P U.S. Total Market Index are down in the past five years, with an average decline of 53.8%.

So equity investors have done great but only if they were in the right stocks. In other words, it’s been very possible to experience meaningful losses in a winning market, which shows the importance of diversification in investing.

And while past performance doesn’t guarantee future returns, shares of the 20 largest publicly traded U.S. companies contributed 60% of the S&P 500’s total return over the last five-years.³ The iShares Top 20 U.S. Stocks ETF (TOPT), which launched on Oct. 24, 2024, empowers investors to access 20 of the biggest and some of the most successful companies in the U.S. with a single trade, via the convenience of the low-cost and tax-efficient ETF wrapper.

The iShares Top 20 U.S. Stocks ETF seeks to track the investment results of an index comprised of the 20 largest U.S. companies by market capitalization within the S&P 500 Index. 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.

Brands currently in the top 20 by market cap include Apple, Amazon, Meta, Johnson & Johnson and JP Morgan Chase. The 20 largest publicly traded U.S. stocks collectively represent $22.6 trillion in market cap, almost equal to the size of the U.S. economy, which produced approximately $25 trillion of GDP in the first quarter of 2024.⁴

These companies operate in more than 160 countries around the world and currently employ about 4.4 million Americans.⁵

Here are three potential benefits of the iShares Top 20 U.S. Stocks ETF:

• Access: TOPT is designed to track the performance of the 20 largest U.S. stocks by market capitalization. You may be new to investing, but you’re probably familiar with these brands, which are some of the largest companies in the technology, consumer goods, communications, healthcare and financial services sectors.
• Diversification: As noted above, a rising equity tide hasn’t lifted all boats and TOPT provides the benefits of diversification vs single-stock ownership. In theory, any potential weakness in one or two of the top 20 may be partially offset by strength in other constituents.
• Convenience: Just like an appetizer sampler removes the challenge of having to choose a favorite starter, TOPT is a one-ticker solution that gives an investor exposure to a variety of large-cap U.S. stocks with no minimum investment other than the price of the ETF itself. With TOPT, investors can get exposure to the 20 largest U.S. stocks at a fraction of the capital required to purchase them individually; it could cost nearly $7,000 to purchase a single share of each of the top 20 stocks included in the fund.⁶

As with all equity index ETFs, TOPT is designed to reflect the price of a collection of stocks — in this case, the 20-largest U.S. companies by market capitalization.

Just like the Billboard Top 20 is regularly updated — based on the sales, airplay and streaming of songs — TOPT adjusts as the market changes. TOPT is professionally managed against an index that dynamically rebalances on a quarterly basis — the third Friday of March, June, September, and December — ensuring investors maintain their exposure to the 20 largest companies on a rolling basis, though it may not reflect current rankings between rebalances.

With the rebalancing done for you automatically, TOPT takes the guesswork out of keeping up to date with the latest corporate trends.