Jeff Bezos says retirees should buy the S&P 500 instead of AI stocks
Jeff Bezos, the founder of Amazon, says retirees should buy the S&P 500.
The short version
- He warns that market bubbles destroy wealth even when new technology succeeds.
- The S&P 500 concentrates nearly 40 percent of its value in just 10 companies.
Jeff Bezos, the founder of Amazon, has a straightforward message for retirees wondering where to put their savings. During an Oct. 7 interview with Fox News anchor Bret Baier, Bezos advised retirees to buy the S&P 500 rather than gamble on individual artificial intelligence stocks.
Bezos believes artificial intelligence is a transformative technology, but warns that bubbles destroy wealth even when the underlying technology ultimately succeeds. His advice echoes Warren Buffett's longstanding recommendation that ordinary investors own low-cost index funds rather than attempt to beat the market.
Yet the S&P 500 carries more risk today than many investors realize. According to State Street's October holdings data, the index's 10 largest companies represent approximately 40 percent of its total value. For a retiree investing $10,000 in a standard S&P 500 fund, roughly $4,000 goes into just 10 stocks.
Nvidia, the chip designer whose processors power artificial intelligence, alone accounts for nearly 8 percent of the portfolio. Microsoft, Alphabet, Meta Platforms, and Bezos's own Amazon also rank among the largest holdings. Charles Schwab's sector analysis showed information technology represented 39.7 percent of the index, making the S&P 500 look more like a technology fund than a balanced portfolio.
If enthusiasm for artificial intelligence fades, the same megacap companies that powered the market higher could drag the entire index down. One alternative is the Invesco S&P 500 Equal Weight ETF, which allocates about 0.2 percent to each constituent, reducing megacap tech dependence without abandoning index investing.
For your own savings, holding sufficient cash and short-term bonds can protect near-term expenses if the market hits a rough patch.
Photo: Amazon
