A New Tech Fund Puts 55% of Your Money in Three Stocks. Zweig Calls It Too Much of a Good Thing.

Fund rules cap how much of a fund one company can be. A fund inside a fund gets around the cap. Zweig's math puts 55% of a new tech ETF in three stocks. Energy has beaten tech by 25 points this year.

By Sean Anees Saifi · Capital Wealth · Published Sunday, November 1, 2026 · Source: The Wall Street Journal Weekend, Saturday/Sunday, October 31 – November 1, 2026, whose market figures are the Friday, October 30 close (Exchange)

Key Points

A fund generally can't put more than 25% in one company. Its stakes over 5% can't add up to more than half the fund. Shares of another ETF don't count.
State Street's new XLKM keeps 66% of its money in XLK. Look through, and it has about 55% in Nvidia, Apple and Microsoft.
$42 billion has flowed into tech index ETFs this year, per Morningstar. In XLK, five stocks are 50% of $126 billion.
Zweig's line we'd underline. Energy stocks have beaten tech by 25 percentage points so far this year.
On the same weekend's markets page, two 2x Intel funds fell 57.78% and 56.99% on a day Intel fell 28.58%. Daily-reset leverage cuts both ways.

55%

Of XLKM effectively in Nvidia, Apple and Microsoft, by look-through

66%

Of XLKM's assets held in its older sibling, XLK

Points by which energy stocks have beaten tech so far in 2026

57.78%

Friday, Oct. 30 loss in a 2x Intel fund, on Intel's 28.58% drop

A close view of a dark blue monitor showing a single bright line climbing steeply from left to right across a faint grid.

A fund that holds another fund can carry far more of one stock than its own holdings list shows.

In one line: A new breed of sector ETF hides a 55% bet on three stocks behind the word index, and Zweig says most people should skip it.

Say you buy a tech index fund to spread your bets. Then you look inside. More than half your money sits in Nvidia (NVDA), Apple (AAPL) and Microsoft (MSFT). That's State Street's new fund, XLKM, by Jason Zweig's math in The Intelligent Investor this weekend. Zweig's verdict is in his headline. These funds are too much of a good thing.

Here's the rule the fund works around. A fund generally can't put more than 25% of its money in one company. And its big stakes, the ones over 5% each, can't add up to more than half the fund. In early 2024 that rule squeezed Nvidia to about 5% of the S&P tech index. Apple and Microsoft sat near 22% each. An index fund can be less simple than its name.

The loophole is a fund inside a fund. Shares of another ETF don't count toward the limits. So XLKM puts 66% of its money into its older sibling, XLK, the $126 billion Technology Select Sector SPDR. XLKM's own stakes look tame. Nvidia 10.3%, Apple 9.8%, Microsoft 7.8%. But XLK held 14.9% in Nvidia, 14.3% in Apple and 11.3% in Microsoft this week. Look through, and XLKM has about 55% in those three. VanEck's TruSector funds do the same thing across all 11 sectors. Its energy fund keeps 23% in the energy SPDR. That pumps up Exxon Mobil (XOM) and Chevron (CVX).

Built for one kind of market

Zweig's point is simple. These funds do best when a few giant stocks rise together. They do worst when those same stocks fall together. That's the market we just had. As AI worries spread, Nvidia faltered, and some uncapped tech funds now lag the plain kind. Zweig adds a line we'd underline. Energy stocks have beaten tech by 25 percentage points so far this year. He grants that these funds could make you more money if you guess the right sector. Then his last line. "The hard part is the word 'if.'"

The same paper shows the harsher cousins of these funds. Among Friday's biggest losers on the markets page were two 2x funds built on Intel (INTC). GraniteShares 2x Long INTC fell 57.78%. Direxion's Intel Bull 2X fell 56.99%. Intel itself fell 28.58%. These funds reset their leverage every day. So a stock that drops by half and climbs back can leave the 2x fund deep in a hole. Zweig's uncapped funds don't borrow. But both kinds are built to win big in one direction.

Our read

Consumer Protection, M11, with Investments/Risk, IN04. Our verdict is avoid, for the extra-strength and leveraged sector funds. It isn't a verdict on owning tech. The trouble is a product that hides a 55% bet behind the word index. Our model books lean the other way on purpose. The equal-weight S&P 500 fund (RSP) sits in 9 books. It fell 0.79% Friday while the cap-weighted fund fell 1.77%. Energy is held as the hedge, Chevron in 37 books and Exxon in 34, at weight, nothing added. Nvidia is in 31 books, also at weight. General planning principles, not advice.

Here's your check this week. Open your 401(k) or brokerage app. Find any fund with sector, select, 2x or 3x in its name. Pull up its top ten holdings and look for another ETF on that list. If one is there, your real concentration is higher than the page shows. Then add up your Nvidia, Apple and Microsoft across every fund you own. You don't check the roof in the middle of the storm. Bring the list to your next review and we'll tally it with you.

What It Means For Your Portfolio

Avoid. Skip extra-strength and leveraged sector funds.

A sector fund that holds another fund can carry a 55% bet on three stocks, so check the look-through before you buy any of them.

General planning principles, not advice for anyone in particular. Fund rules limit any one stock to 25% and big stakes to half the fund. A fund that owns another ETF sidesteps both. XLKM's own list shows 10.3% in Nvidia. The true figure is about 20%.

Leveraged 2x and 3x sector funds reset daily and tend to lose ground in choppy markets. Friday's 57% drops in two Intel funds showed the sharp edge. If you want tech, a broad fund or an equal-weight fund keeps the bet sized. Know what you own before the next bad day.