Top 5 portfolio holdings – USA Index Fund

USA Index FundThis is the first in a series of posts which outline the five biggest companies held in an index fund held within an investment portfolio. An index fund is an investment fund constructed to track a particular stock market index like the US S&P 500. Top holdings in a typical USA index fund are outlined here.

Think like an owner – knowing the actual companies that you hold in index funds will help in understanding that you own slices of real companies which provide value and generate income.


USA economy and target portfolio allocation

With the largest national economy in the world, the United States is home to some of the biggest and most innovative global companies. The country has a 23% share of global nominal Gross Domestic Product (GDP). GDP is the total value of goods and services produced by a country in a given year. Due to this significant proportion, I believe that it is essential for every serious investor to hold USA stocks within their portfolio. I am based in the UK and have a target allocation of 30% USA stocks for my portfolio.

I will now get straight into the top 5 holdings in the USA fund.

APPLE INC. (AAPL)
Apple rainbow logo, resurrected for diversity in 2015. By Rob Janoff (1977)

Apple rainbow logo by Rob Janoff (1977)

Apple Inc, incorporated in 1977, one of the biggest and most innovative global technology companies, manufactures a range of hardware including iPhones, iPads, TV streaming boxes and smartwatches. Additionally, Apple  produces software including a mobile operating system (iOS), Mac OS for personal computers and watch OS for smartwatches. The company also delivers digital content consisting of apps, music and video via its internet services platforms.

I use an Apple MacBook for computing at home and an iPhone when I am on the move. I have found the products to be fast, user friendly and reliable.

Apple Inc. makes up 2.68% of my USA index fund and has a projected dividend yield of 1.67%. The company’s 10 year annual return is 28.40% which is very impressive. Latest 5 year returns for Apple stocks are:

20122013201420152016
32.717.6440.03-2.8012.15
MICROSOFT CORP. (MSFT)

Microsoft logo

Microsoft Corporation, incorporated in 1993, is a leading technology company which is mostly known for the Windows operating system. Microsoft develops, licences and supports a wide range of software applications including Personal Computer (PC) Operating Systems, cloud services, enterprise applications and video games. Other services provided by Microsoft are training and certification, personal and corporate productivity solutions, and web related solutions.

Like most, I have used Microsoft products throughout my education and working career. It is likely that the company will keep generating solid returns for the long term investor.

Microsoft makes up 2.08% of my USA index fund and has a projected dividend yield of 2.4%. The company’s 10 year annual return is a respectable 10.11%. Latest 5 year returns for Microsoft stocks are:

20122013201420152016
6.0943.6927.2422.2214.65

EXXON MOBIL CORP. (XOM)

ExxonMobil logo - Energy lives here

Exxon Mobil Corporation, incorporated in 1888, is the largest American energy company. The company operates on a global level and is involved in oil exploration and extraction, and the processing, refinement and transportation of petroleum products. Exxon’s business activities encompass both upstream and downstream operations.

We all use petrochemical products in some way, from fuel for vehicles to heating our homes so energy companies will continue to provide investors’ with returns in the form of healthy dividends and capital growth.

Exxon Mobil makes up 1.44% of my USA index fund and has a projected dividend yield of 3.61% which is reasonably high. The company’s 10 year annual return is 3.97%. Latest 5 year returns for Exxon Mobil stocks are:

20122013201420152016
4.6819.77-5.98-12.5719.62
AMAZON.COM INC. (AMZN)

Log of Amazon.com an online commerce company

Amazon.com, incorporated in 1996, is a household brand which offers a wide range of services via its online platform, in particular a marketplace for selling and buying of goods. The company was founded by billionaire entrepreneur Jeff Bezos. Amazon also offers electronic products such as the Kindle range and also digital media content. Amazon Prime services offer free two day shipping, unlimited video and TV shows, and the ability to borrow books from the Kindle library.

Amazon Web Services (AWS) provides a cloud based platform, with services such as cloud computing, networking, databases and storage for use by a range of customers from start ups to multi-nationals.

I will be using the Fulfilment By Amazon programme as one of my side hustles for generating additional income. I will detail my progress in a series of posts starting with this one.

Amazon.com Inc. makes up 1.34% of my USA index fund. The company does not pay dividends to Shareholders, instead reinvesting into growing the business. The company’s 10 year annual return is an epic 36.19%. Latest 5 year returns for Amazon stocks are:

20122013201420152016
44.9358.96-22.18117.7810.95
BERKSHIRE HATHAWAY INC. (BRK.A)

Logo of Berkshire Hathaway

Berkshire Hathaway Inc., a multinational conglomerate, traces its roots all the way back to 1839. With Warren Buffett as CEO, the company owns a wide array of businesses offering products including lollipops, clothing, industrial lubricants, insurance, energy, housing, railways and airplanes. Berkshire also has a large diversified portfolio of high quality stocks.

Berkshire Hathaway Inc. makes up 1.29% of my USA index fund. The company does not pay dividends to Shareholders. Berkshire has never paid a dividend – the company reinvests in its business to expand and grow territorially. The company’s 10 year annual return is a solid 9.58%. Latest 5 year returns forBerkshire Hathaway stocks are:

20122013201420152016
16.8232.7027.04-12.4823.42

Above are the top five holdings in the USA index fund in my portfolio. For overviews of the top 5 companies in typical index funds for other world regions click below:




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