On this week’s episode of What Are Your Thoughts? Josh and I got into a debate about some potential sector misclassifications. American Express is in financials, but Visa, Mastercard, PayPal and Square (VMAPS) are not.

I don’t want to get into the weeds about whether they belong in financials or technology, I can see the case for both sides. What I want to discuss is how their exclusion has impacted the performance of financial stocks.

Over the last 3 years, XLF is flat while the S&P 500 is up more than 40% over the same time. Woof.

Josh thought that the four stocks would have a huge difference on returns and I didn’t. I was wrong.

We deconstructed XLF and then built it back up to include VMAPS, and there is a wide spread. (We couldn’t get the performance of XLF to line up perfectly, but directionally it tells the story). These four names are over $1 trillion, so they would currently represent more than 25% of the index if they were included.

I’m not so sure VMAPS are improperly classified, but the ramifications of which sector they’re in can be quite significant, as the chart above shows.

Josh and I got into this and much more in our latest episode, check it out below!

Subscribe to the channel, you’ll get a notification as the show is about to premiere each week.

Josh and I use YCharts when creating visuals for this show, as well as for many aspects of their business. What Are Your Thoughts viewers can get a 20% discount for YCharts by clicking here (new users only):

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

The Compound Media, Inc., an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.