LEILA FADEL, HOST:
The economy may be limping along, but the stock market keeps hitting new highs. Yesterday, the S&P 500 broke the record it set on February 19. It's been great for people's retirement funds, and what's driving the market forward are a few big tech stocks. NPR's Jim Zarroli reports.
JIM ZARROLI, BYLINE: For years, it's been gospel for average investors. If you want to invest in stocks, make sure to diversify by lots of different kinds of companies. Lu Zhang is a professor of finance at The Ohio State University.
LU ZHANG: The old saying is that never put all your eggs in one basket because once you've dropped the basket, you lose all your eggs.
ZARROLI: That was the idea behind the S&P 500 Index Fund.
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JACK BOGLE: Indexing always works best up, down or sideways.
ZARROLI: That's the late Jack Bogle, the legendary investor who founded Vanguard. Bogle changed the way people invested. He created a fund that buys shares of 500 of the largest American companies in every corner of the U.S. economy. The S&P 500 Index has been doing really well in recent months, but this year, the gains have not come from all parts of the economy. Instead, they've been driven by just six hot tech stocks.
ASWATH DAMODARAN: And those six companies are Facebook, Amazon, Netflix, Google, Apple and Microsoft.
ZARROLI: NYU finance professor Aswath Damodaran says these stocks are playing a huge part in the market rally right now. A decade ago, they made up 6% of the S&P 500 Index. Today, they're 20%. Apple just today reached a market capitalization of $2 trillion and Damodaran says if you weren't invested in these stocks in recent years, you may well have lost money.
DAMODARAN: Even the very best value investors (ph) - Warren Buffett has underperformed the market for the last 10 years - biggest reason is until 2017, he refused to own any of these stocks.
ZARROLI: That's right. Buffett said for years he didn't understand tech stocks, so he didn't want to buy them. He finally broke down and bought Apple shares, and his funds have done better as a result. Lu Zhang of Ohio State says there's a reason these six stocks have done really well. It reflects the vast importance they play in our lives.
ZHANG: In terms of the broad economic changes, these companies are on the right side of history. I think they're going to do well.
ZARROLI: Damodaran agrees. He says just look at how many hours of the day the average person spends engaging with one of these companies. He's seen it in his own life.
DAMODARAN: As I go around the house, I realize how dependent my lifestyle has become on these six companies.
ZARROLI: Damodaran says you can debate all you want about the role that technology plays in our lives and whether it's a good thing.
DAMODARAN: But the market is not a morality play. It's reflecting the reality, which is these companies essentially are the companies that make the world go round.
ZARROLI: But it also means that huge numbers of people have staked their retirement funds on how these six stocks do. And while no one is writing these companies off, there are good questions about their future. These companies have come under intense scrutiny recently. Several of them are under investigation by Congress where there are calls to break them up. Just last month, heads of four of the largest tech companies were in the hot seat testifying in Washington. All this raises questions about whether their lofty stock prices can hold up. Jim Zarroli, NPR News. Transcript provided by NPR, Copyright NPR.