The “Magnificent Seven” comprises a group of seven mega-cap tech-oriented companies that have enraptured investors with their sterling performance – Microsoft (NASDAQ: MSFT), Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOGL/NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), and Tesla (NASDAQ: TSLA).
Though owning a single share of a company may feel like dipping a toe into the investment waters, the approach of acquiring one share of each “Magnificent Seven” stock may not yield optimal results. The arbitrary pricing of stocks, influenced by factors such as outstanding share count and market capitalization, can lead to uneven weightings in the portfolio.
For instance, purchasing one share of each stock could cost as much as $2,417.86, given the divergent prices of companies like Nvidia, Meta Platforms, and Microsoft compared to others in the group, as of recent market close on April 26.
Alternatively, investing in funds with substantial exposure to the Magnificent Seven, such as the Vanguard Growth ETF (NYSEMKT: VUG) with a 52.5% allocation and the Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) with a 57% allocation, may offer a more balanced and cost-effective approach.
The Art of Crafting a Solid Investment Thesis
Success in investing transcends mere luck; it hinges on the foundation of a coherent investment thesis. A clear investment thesis provides a roadmap for understanding the rationale behind each investment, enabling investors to navigate market vicissitudes with greater clarity and confidence.
Getting to know the core drivers of earnings growth for each company is pivotal in constructing a sound investment thesis. For example, Microsoft’s pursuits include cloud infrastructure, enterprise software, and artificial intelligence, while Apple focuses on consumer electronics, entertainment, and AI.
Having a well-thought-out investment thesis not only informs your investment decisions but also guards against impulsive actions, such as panicking during market downturns or prematurely cashing out in the face of success.