This piece, "Memo: Stepping Away from the Index," details an investor's decision to exit their S&P 500 index fund position, driven by a discomfort with owning a "black box" and a commitment to understanding underlying investments. The author highlights concerns about the index's elevated valuations (P/E ~28, CAPE ~36.5), historical dividend lows (~1.3%), record net margins (~12.7%), and extreme concentration (top 10 companies nearing 40% of the index), echoing risks seen in past market peaks. The author argues that actively understanding business fundamentals, risks, and profit drivers offers greater comfort than relying on an index whose past performance may not be sustainable, especially without hyperinflation, and whose concentration could lead to a domino effect during a market panic. The memo advocates for individual responsibility for investment outcomes and an aspiration to outperform the index over the long term by focusing on transparent valuations rather than broad market assumptions.

You can read the full memo here: https://andreevdan.substack.com/p/memo-stepping-away-from-the-index