By Wes Crill, PhD, Dimensional Fund Advisors

Some investors attribute the Magnificent 7 stocks’ dominance to a “winner take all” environment in which a handful of companies achieve sufficient market share to hinder competition.¹ In businesses where gaining users drives success, establishing a strong market share may be like building a moat around profitability. But that doesn’t guarantee these companies can stay on top.

Think about the state of mobile phones 15 years ago. In all likelihood, you would have been reading this on a BlackBerry, such was that device’s entrenchment for mobile business communication. Then, along came iPhones and Androids, and suddenly BlackBerry’s foothold was eroded.

EXHIBIT 1

BlackBerry Trailing 12-Month Sales per Share

Past performance is not a guarantee of future results.

In USD. Source: FactSet.

History is littered with examples of household names that were usurped by the Next Big Thing. Remember, Sears was a top 10-sized stock in the U.S. once upon a time. AOL was synonymous with internet access in the 1990s. And in 2003, the most popular social media network starting with the letter F was Friendster.

Even the biggest companies have uncertain futures, highlighting the need for broadly diversified investments. And even if these companies stay at the top of the market, that’s no assurance higher returns will continue if their success is expected.

FOOTNOTES

1. The Magnificent 7 includes Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla. Named securities may be held in accounts managed by Dimensional.

DISCLOSURES

The information in this material is intended for the recipient’s background information and use only. It is provided in good faith and without any warranty or representation as to accuracy or completeness. Information and opinions presented in this material have been obtained or derived from sources believed by Dimensional to be reliable, and Dimensional has reasonable grounds to believe that all factual information herein is true as at the date of this material. It does not constitute investment advice, a recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. Before acting on any information in this document, you should consider whether it is appropriate for your particular circumstances and, if appropriate, seek professional advice. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized reproduction or transmission of this material is strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.

This material is not directed at any person in any jurisdiction where the availability of this material is prohibited or would subject Dimensional or its products or services to any registration, licensing, or other such legal requirements within the jurisdiction.

“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, Dimensional Fund Advisors Pte. Ltd., Dimensional Japan Ltd., and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.

RISKS
Investments involve risks. The investment return and principal value of an investment may fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.