Looking at Apple Stock? Why Most Investors Don't Need It

Few stocks have raised more controversy and debate lately than Apple (NASDAQ: AAPL  ) , with the stratospheric rise and similarly devastating decline in its stock price over the past year. But if you're considering whether to add Apple stock to your portfolio, consider one key thing: Odds are, you already own plenty of Apple stock, even if you don't even realize it.

Why you can't escape Apple stock
The place where Apple stock is hiding in millions of investors' portfolios is in their holdings of exchange-traded funds and mutual funds. Just about everywhere you look, you'll find fairly high concentrations of Apple stock in those pooled investments. That's because despite its recent decline, Apple still ranks in the top two companies in the U.S. stock market in terms of market capitalization, and that's enough to give it plenty of weight in some of the most widely followed index investments in the financial markets.

Take a look at some of the investments that give millions of investors indirect exposure to Apple stock:

  • The widely held SPDR S&P 500 ETF (NYSEMKT: SPY  ) , with $130 billion in assets under management, has a 2.6% allocation to Apple. Put another way, the ETF owns 8.8 million shares of Apple stock, representing almost 1% of the tech giant's total outstanding shares.
  • The tech-tracking PowerShares QQQ (NASDAQ: QQQ  ) tracks the much less inclusive Nasdaq 100 index, which includes the largest non-financial companies traded on the Nasdaq exchange. There, Apple has an 11% allocation, with the ETF owning more than 9.3 million shares of Apple stock. Think of it this way: For every 100 shares of the ETF you own, you indirectly own almost two shares of Apple, along with shares of dozens of other companies.
  • Among index mutual funds, the story is much the same. The Vanguard 500 Index (NASDAQMUTFUND: VFINX  ) owns 8.9 million shares of Apple, representing an almost 3% weighting in the S&P 500-tracking fund. The Vanguard Total Stock Market Index Fund (NASDAQMUTFUND: VTSMX  ) , meanwhile, is the biggest fund owner of Apple stock, with 13.1 million shares held.

Nor are these funds particularly unusual. Overall, Apple is one of the favorite holdings among institutional investors. Yahoo! Finance reports that almost 2,000 different institutions own Apple shares, with giants like State Street, Fidelity, BlackRock, and JPMorgan Chase among the top institutional holders of Apple stock.

Do you need to buy more Apple?
With so much Apple stock hidden in many investors' portfolios, buying additional shares can leave individual investors dangerously overexposed to the tech giant even without investors being aware of it. With many financial advisors recommending that investors put no more than 5% of their money in a single stock, those who own ETFs or mutual funds with high concentrations of Apple among their holdings really shouldn't add more shares separately if they want to maintain a highly diversified portfolio.

Of course, some investors will want to take on the risk of a concentrated position in the iDevice-maker's stock, especially those who believe that Apple will confound skeptics and come out with a new set of innovative product offerings that will reinvigorate the company's recently flagging growth. That's one reason why you'll find some additional shares of Apple in my portfolio, as well as the belief that the stock represents a good value even if growth never heats up again. But in terms of missing out entirely on an Apple rebound, most investors have nothing to worry about because of their already-extensive indirect holdings of the stock.

Always look through your fund holdings
The lesson for investors here is that if you own ETFs and mutual funds, you need to consider their holdings when evaluating your overall risk. The danger of owning more Apple stock than you want or need is just one way in which failing to pay attention to what your funds are doing can burn you.

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Read/Post Comments (13) | Recommend This Article (31)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 28, 2013, at 1:25 PM, larryw101 wrote:

    Another bashing article by a foolish Motley author.

  • Report this Comment On June 28, 2013, at 2:48 PM, jsssm wrote:

    Yes, the second biggest company in the world is in a lot of indexes and mutual funds. What a surprise!!!!!

  • Report this Comment On June 28, 2013, at 3:20 PM, PaulApp wrote:

    You meant lot of big funds and ultra big banks and businesses already owned Apple stock! Now, just imagine when they will all dump it at the same time!

  • Report this Comment On June 28, 2013, at 3:41 PM, Henry3Dogg wrote:

    "...with the stratospheric rise and similarly devastating decline ..."

    5000% up 40% down

    Very similar

  • Report this Comment On June 29, 2013, at 5:38 PM, somethingnew wrote:

    I don't because a couple of years ago I made sure none of the three mutual funds from work contained Apple as a major top holding. So yeah I missed the accent but now I'm missing the decline.

  • Report this Comment On July 01, 2013, at 9:05 AM, mikecart1 wrote:

    Some of these comments are hilarious. Anyways, history often repeats itself despite all the rules, tips, guidance, and books created on investing. People always like to look in the past and see how buying when everyone is selling and selling when everyone is buying would have made you rich beyond your wildest dreams.

    Then comes present day and it is happening yet again to yet another stock. Then again people go against the logic written in thousands of books and never become rich.

    Let's bash Apple because everyone else is. Because Apple is the stock shareholders deserves, but not the one it needs right now. So we'll hate it and sell. Because Apple can take it. Because Apple's not our hero. It's a silent innovator. A watchful business. A Great Investment.

  • Report this Comment On July 01, 2013, at 11:43 AM, famiglia112 wrote:

    I agree that these comments are pretty funny. @Henry3Dogg, you do realize that the most a stock can ever go down is 100%, right?

  • Report this Comment On July 01, 2013, at 12:45 PM, ems79 wrote:

    @famiglia112 ... I'm sure he does realize that, he also realizes that current values are still tens of times higher than the price was 10 years ago. His point being that being cut in half in the past couple of quarters is fine when you consider the huge growth it has seen.

    For the casual investor this article is a good reminder of the fact that so many MF's, ETF, etc are including Apple as a relatively large component, so there is often no need for direct exposure, better to focus the individual stock decisions on something else...

  • Report this Comment On July 01, 2013, at 1:54 PM, BrandonStone wrote:

    Lol How biased can you actually get?! Come on man! Don't you know about LINUX? More and more people, as well as employers, are moving towards LINUX for general computer use. Why? Because it's not a BS operating system like every Windows OS out there, it doesn't keep getting worse such as Microsoft's Windows OS keeps getting worse with every rendition, new OS or remodeling schemes and it's not outrageously expensive like the MAC OS< which realistically is only good for audio recordings, graphic design, filming, that sort of thing. Therefor, it's not cost effective for anything else. Plus, their statements about being virus free has always been a fraud. LINUX is better in oh so many ways as well. Check it out, or stick with either a MAC, or a Windows and risk facing a imminent yet metaphorical <a href="http://www.davidharrislaw.com/services.html">car accident lawyer in Waukegan, IL</a>, trying to get yourself out of a disaster that you yourself threw yourself into. Ha ha

  • Report this Comment On July 01, 2013, at 2:53 PM, Mega wrote:

    "With many financial advisors recommending that investors put no more than 5% of their money in a single stock"

    Most of whom are thousandaires. Have you ever heard a billionaire advocate this approach?

  • Report this Comment On July 05, 2013, at 2:09 PM, 1RottenApple wrote:

    Apple needs some New Cutting edge Products. Until then, you do not need Apple

  • Report this Comment On July 05, 2013, at 7:02 PM, kwtoufectis wrote:

    I echo Henry3Dogg's concern with equating a ~5000% increase and a ~40% decrease. That results in a 3000% gain, hardly "similarly" performing (and since the former was rising, your word choice of "devastating" only further muddies "similarly").

    The decline WOULD be "similar" to the rise if the "down 40%/year" trend lasts 9 years (you'd only be 43% ahead then!). If you're predicting 8 more 40% down years at Apple, by all means say so plainly, and explain why--we'll be very interested!

    I have no problem with the thrust of your article, but your poorly phrased intro bleeds the credibility you depend on by implying a hidden agenda (even if unintended).

  • Report this Comment On July 07, 2013, at 10:58 AM, aleax wrote:

    @megashort, `"With many financial advisors recommending that investors put no more than 5% of their money in a single stock"

    Most of whom are thousandaires. Have you ever heard a billionaire advocate this approach?`

    Plenty -- e.g Ken Fisher, $45 billions under management, $1.7 billion personal fortune (roughly midway through the Forbes 400) self-made handling investments.

    His largest stock position (Pfizer) is just 2.7% of his portfolio, and he's often written advocating such high diversification (among stocks only) in his many best-selling books and long-running column on Forbes.

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