AI Swings Rock the S&P 500. Time to Buy in Thirds?

Buy an S&P 500 index fund, and you'd expect to own a broad slice of American business. Yet in early October, by one count from Bianco Research, 41 artificial intelligence (AI)-related companies accounted for nearly 49% of the index's combined market value. By Bianco's reckoning, that's a higher concentration than in any past market episode except the 19th-century railroad boom.

That weight means trouble in AI-linked stocks can quickly drag down the whole index, as it did last week. Only 4 of the S&P 500's 11 sectors fell, yet the index still lost nearly 2%, its worst week since June. Technology, its largest sector, dropped almost 8% and pulled it down.

Many AI-linked companies are growing quickly, and their shares can swing hard on inflation data and earnings reports. Because those companies now carry so much of the index, those swings can reach almost any stock portfolio.

So even if you've never bought an AI-linked stock directly, an index fund could give you more exposure than you'd assume. Whatever you own, the recent sell-off probably got your attention.

A Plan for Not Knowing

Was last week a pause in a long climb or the first leg of something worse? No one can say where the market will be a month or a quarter from now, professional forecasters included.

If you've been waiting for a dip to buy an AI-linked company you believe in, the recent drop could look like one. You might also feel less sure than you did 10 days ago, and you'd have company. By last Friday, CNN's Fear & Greed Index had dropped into its Extreme Fear zone.

Both Team Rule Breakers and Team Hidden Gems have long agreed on an approach called buying in thirds for moments like this. Research from Vanguard suggests it tends to make a little less money on average, but it can still be worth that price, especially in a market like this one.

The process is simple. Say you've set aside $3,000 for a stock or a fund. Split it into three $1,000 pieces. Buy the first piece today. Buy the second on the same date next month or next quarter at whatever price it trades for. Buy the third one period later on the same terms.

Why It Can Help

Whichever way prices move next, you'll have something to be glad about. If they rise, part of your money is already working. If they fall, your remaining thirds will likely be cheaper and bring down the average you paid.

David Gardner calls the approach "an incredibly effective win-win way to get invested in any volatile stock that's trading high."

Tom Gardner agrees. Replying to members following his September 2025 Quarterly Call, he suggested thinking in five-year increments and treating each purchase like real estate you won't be able to resell for a long time. With that mindset, he added, "it can be a good idea to buy in thirds."

He has also encouraged members to try small positions in ideas that interest them. If those work out, "maybe you just get a few free dinners for now." If they don't, the price is a few low-cost meals at home.

The Trade-Off

Historically, U.S. stocks have risen more often than they've fallen, so money held back can sit idle while prices climb. Vanguard research has found that investing a lump sum right away beats spreading it out about two-thirds of the time. However, our view is that this small cost can be worth paying if it gets you invested at all.

Buying in thirds might be worth that trade-off if two things are true for you: (1) You believe the company will be worth meaningfully more three or more years from now, and (2) without a plan, you'd likely either keep waiting or put everything in at once on a hunch.

Whether last week was a pause or a turn might not be clear for months. Buying in thirds is designed to hold up either way. If you've been circling an AI-linked stock for a while and believe in the business, this pullback could be a reasonable moment to buy your first third and put the next two dates on your calendar.

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