Buffett Won't Buy Apple Yet — That's A Problem For ETF Investors

Warren Buffett’s admission that he sold Apple Inc (NASDAQ:AAPL) too early should have been a bullish signal. But the billionaire’s reluctance to invest in the iPhone maker now is telling us something different. It could mean that, even after the recent pullback, the market’s most important stock may still be overvalued.

This is important far beyond the confines of Berkshire Hathaway Inc (NYSE:BRK). That is because, to ETF investors, this is not just about Apple. It is about how much of their portfolio depends on it.

You Don't Own ‘Tech’ — You Own Apple

Apple's dominance in the ETF space is far larger than the average investor even realizes.

Even the broad-based ETFs such as the SPDR S&P 500 ETF Trust (NYSE:SPY) and the Invesco QQQ Trust (NASDAQ:QQQ) already have meaningful positions in Apple. Also, the sector-based ETFs, which investors assume to be diversified, are still overly concentrated in Apple.

ETFs such as:

• Global X PureCap MSCI Information Technology ETF (NYSE:GXPT)
• Fidelity MSCI Information Technology Index ETF (NYSE:FTEC)
• Vanguard Information Technology ETF (NYSE:VGT)
• iShares U.S. Technology ETF (NYSE:IYW)
• VanEck Technology TruSector ETF (NASDAQ:TRUT)

currently allocate roughly 15%–20% to Apple alone.

Owning multiple of these doesn't diversify exposure—it multiplies the same bet.

Buffett's Signal: It's About Price, Not the Business

Buffett is still extremely bullish on Apple, according to the Oracle of Omaha’s latest comments. But the question remains: Is now the right time to own Apple? His conviction about waiting for a better entry point underscores that a great company does not necessarily mean a great time to invest.

For investors in passive ETFs like those mentioned above, the choice to wait does not exist. Either leave the entire ETF and lose the gains from the other holdings, or keep holding and increase concentration risk. Basically, passive investors are:

• Forced to own Apple at high weights
• Unable to sell Apple even if the price is high

So even when Buffett steps back, ETF investors remain fully invested in Apple.

The Real Risk: Concentration Disguised As Diversification

Here's where it gets uncomfortable.

If Apple drops 10%, a tech ETF with 20% exposure could lose around 2% from Apple alone, before factoring in the broader tech weakness it will bring. That creates a fragile setup.

In effect, Apple has become a load-bearing pillar for both tech and broad-market ETFs.

What Passive Investors Can Do

This doesn't mean abandoning tech ETFs, but being intentional with them can be key.:

• Avoiding stacking multiple tech ETFs with identical Apple exposure
• Considering balancing with equal-weight strategies like Invesco S&P 500 Equal Weight ETF (NYSE:RSP)
• Diversifying beyond mega-cap-driven funds with ETFs such as Invesco S&P 500 Pure Value ETF (NYSE:RPV) and
• Considering investing in active ETFs like Fidelity Blue Chip Growth ETF (BATS:FBCG), as portfolio managers have the leverage to adjust Apple exposure in a fund could bring a good balance to your portfolio.

Because right now, many portfolios aren't diversified—they're leveraged to one stock's valuation.

Photo: © Steven Branscombe-Imagn Images