In stock market discussions, people always seem unable to avoid the "seven giants", the giant technology companies that have consistently driven index gains in recent years. Of course,$S&P 500 Index (.SPX.US)$there are also hundreds of stocks in addition to $Alphabet-A (GOOGL.US)$Please use your Futubull account to access the feature.$Apple (AAPL.US)$N/A.$Amazon (AMZN.US)$,$Meta Platforms (META.US)$,$Microsoft (MSFT.US)$,$NVIDIA (NVDA.US)$And.$Tesla (TSLA.US)$In addition, some of the recent stocks have performed very well.

In fact, among the top 20 best-performing stocks in the s&p 500 this year, only two are from the "Seven Giants": Nvidia ranks 2nd with a 178% increase; Meta ranks 19th with a 62% increase. The best performing stock is$Vistra Energy (VST.US)$tesla, with an impressive 240% increase. (There are also $Palantir (PLTR.US)$N/A.$Constellation Energy (CEG.US)$and$GE Aerospace (GE.US)$ and $United Airlines (UAL.US)$ 。）

This reminds us that if you only bet on the "Seven Giants" in your investment portfolio, you may be leading when they perform well, but you will also lag behind when they falter.

Sylvia Jablonski, CEO and Chief Investment Officer of Defiance ETFs, said that the real issue is that the stocks of the "Seven Giants" are too common, with significant gains, to the point that investors may not realize they hold these stocks. Or even if they do, they may not be aware of how concentrated their positions are.

"You may think you don't hold any stocks from the 'Seven Giants'," she said, "but take a look at your investment portfolio, at every ETF you hold. If it involves technology or semiconductors, then your exposure to the 'Seven Giants' is definitely significant. If you hold any index funds, it is also very likely that you indirectly hold these stocks. Moreover, these stocks may be too heavily weighted in the index.

Jablonski mentioned the S&P 500 index, which is market cap weighted, meaning the larger the company's market cap, the greater its influence on the index. Recently, the 'Seven Giants' accounted for nearly 33% of the total market cap of the S&P 500.

To address this situation, Defiance has launched a new ETF called XMAG, which includes all stocks in the s&p 500 index except for the "Big Seven", totaling 495 stocks, weighted by market cap, with the code $Defiance Large Cap Ex-Magnificent Seven ETF (XMAG.US)$ (Interestingly, this name also implies its positioning as the "anti-Big Seven").

Why 495 only? The s&p 500 actually includes 503 stocks, but only 500 companies, because it includes $Fox Corp-A (FOXA.US)$Please use your Futubull account to access the feature.$News Corp-A (NWSA.US)$ Stocks of Alphabet, the parent company of Google, are listed in a dual listing.

Is this ETF just a marketing gimmick or does it have substantial content? Jablonski said, "This idea came from conversations with many clients. They told us, 'The 'big seven' holdings in various funds and ETFs in my portfolio are too concentrated, and I am concerned about the lack of diversification. How can we achieve that?' So we started thinking." She stated that XMAG is a way for investors to "hedge and reinvest funds in a more diversified manner."

In fact, there is already an ETF opposite to XMAG, which is launched by Roundhill Investments $Roundhill Magnificent Seven ETF (MAGS.US)$ It provides equal-weight exposure to the 'seven giants' stocks.

Since its listing in April last year, MAGS has also performed strongly, rising by 94%, surpassing the 45% increase in the s&p 500. This year, MAGS has risen by 41%, while the s&p 500 has risen by 24%.

It is worth noting that as the s&p 500 is a market cap weighted index, its performance is largely driven by the 'big seven,' which means that the 495 stocks excluding the 'big seven' have underperformed MAGS and the s&p 500 over the past period.

Doesn't this lead to an unattractive backtest for XMAG, right? Sylvia said, "The historical backtest has indeed been unfavorable for us, but that's the point. The past five years have indeed belonged to the 'big seven.' Yes, these names have already seen significant gains, but now we are starting to talk about diversification."

In fact, the situation may already be changing. In the last three months, the performance of the 'big seven' has weighed on the market, rising only 2%, while the s&p 500 has risen by 5.7%.

Perhaps XMAG's shining moment is starting now.

Editor/Somer