One of the many arguments in favour of passive investing is that investors are able to eliminate stock-specific risk while achieving the return of the entire market. Passive investing is an investment strategy that aims to maximise returns over the long run by buying a sample of shares that represent one or more market indices. The advantage of this approach is that it seeks to spread risk by avoiding losses that can result from a large decline in one specific share or sector. This works well in efficient markets like the US, where equity investors who track the S&P 500 index effectively have a portfolio where the 10 largest stocks (including companies like Apple, Google, Microsoft, Facebook and Amazon) still make up less than 20% of their holdings. In SA, however, this argument does not hold as the stock market is highly concentrated.The largest listing on the JSE is Naspers, which now makes up more than 19% of the all share index (Alsi) and 23% of the shareholder weighted index (S...
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