You own an S&P 500 index fund. So you’re diversified across 500 companies. Right?
Not exactly.
As of August 31, 2026, the 10 largest companies represented 37.8% of the entire S&P 500. One company alone represented 8.1%. That means a $1 million S&P 500 portfolio has roughly $378,000 riding on just 10 companies.
And look at the names: Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, Meta, Micron and Tesla dominate the list. Different companies, yes. But many are exposed to the same powerful themes: technology spending, AI investment, semiconductors, digital advertising and growth-stock valuations.
This level of concentration is historically unusual. S&P Dow Jones Indices reports that by mid-2025, the top 10 represented almost 40% of the index—a level not seen since the mid-1960s. citeturn0search0
And history gives us a useful warning.
In 1965, the giants included AT&T, General Motors, Sears and Kodak. They looked dominant too. Yet several eventually suffered catastrophic declines or bankruptcy, and the original top 10’s share of the index ultimately collapsed to a fraction of what it had been.
We don’t even have to go back that far. In 2022, the 10 largest S&P 500 companies lost 37% of their combined market capitalization, while the overall index lost about 20%.
Meta fell 64.2%.
Tesla fell 65.0%.
Amazon fell 49.6%.
Microsoft fell 28.0%. citeturn0search4
These were not bad companies. That’s the point.
Concentration risk isn’t about owning bad companies. It’s about what happens when too much of your wealth depends on the same handful of great companies continuing to be great investments.
For someone who is 35 and accumulating assets, that may be a risk they’re comfortable taking. For someone approaching retirement with $2 million, $5 million or $10 million invested? I think it deserves a much closer look, because owning 500 stocks doesn’t automatically make you diversified when nearly 40 cents of every dollar is concentrated in just 10 of them.
The number of holdings in your portfolio matters far less than where the actual risk is concentrated.
I have covered this topic in much greater detail in a recent video of mine. Comment YOUTUBE, and I will DM you a link to the video.
