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Start by checking what you own across all accounts—not just how many funds or stocks you hold. A broad U.S. index can contain hundreds of companies yet still place a large share of its value in a handful of mega-cap stocks. To reduce reliance on those leaders, investors can consider international stocks, smaller companies, alternative index weighting, or bonds where appropriate to their goals. None is a guaranteed way to avoid losses, and high concentration alone does not show that a decline is imminent.
Why a broad index can still be concentrated
Many broad U.S. equity funds track market-cap-weighted indexes: each company’s weight reflects its market value relative to the index. As a result, the biggest companies get the largest weights. Owning one such fund may give you exposure to hundreds of companies without distributing your money evenly among them.
S&P Dow Jones Indices reported that the 10 largest S&P 500 companies represented almost 40% of the index by mid-2025, a concentration level it said had not been seen since the mid-1960s. This is a dated snapshot, not a current weight for every fund: prices and holdings change over time. S&P Dow Jones Indices’ report, In the Shadows of Giants, discusses the trend.
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Measure your exposure before changing it
Review holdings across retirement, taxable, and other investment accounts, including the underlying holdings of each fund. Two funds with different names may own many of the same largest companies. A high count of securities does not, by itself, establish that the portfolio is diversified.
- Largest-company exposure: Identify the biggest positions and their combined share of your total portfolio.
- Sector exposure: Check how much depends on a small number of industries or related business drivers.
- Geography: Separate U.S. from non-U.S. equity exposure and note country and currency risks.
- Asset mix: Compare your actual stock and bond weights with the mix required by your time horizon, goals, and ability to bear losses.
- Risk as well as value: A position’s share of portfolio value is not the same as its contribution to overall risk.
Use current fund holdings and account statements where available. Index composition is not a substitute for checking the funds and securities you actually own.
Ways to broaden a portfolio
Each approach changes more than the names on a holdings list. Choose based on the exposure you want to reduce and the trade-offs you can accept, rather than on a prediction that AI-related stocks must fall.
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Add international equities
Non-U.S. stocks can reduce dependence on U.S. mega-cap leadership and introduce exposure to different countries, companies, and market drivers. They also bring country and currency exposures, and they may underperform U.S. stocks for extended periods. Vanguard’s May 2025 research discusses international stocks as one possible diversification component, not a universal allocation prescription. Read Vanguard’s ETF industry trends research.
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Consider small- and mid-cap stocks
Smaller U.S. companies can broaden company-size exposure beyond the largest firms. Their returns and volatility can differ from those of mega-cap stocks, so adding them is not simply a way to keep the same risk with fewer AI holdings. Vanguard’s research also identifies small- and mid-cap stocks as potential diversification options.
Compare market-cap, equal-weight, and capped approaches
A market-cap-weighted index follows relative market values, so its largest constituents can become more influential as their values rise. Equal-weight indexes give constituents more similar weights, while capped indexes limit the largest weights. These methods can reduce the influence of the biggest companies, but they also change stock and sector exposures and may involve different rebalancing patterns. They can lag a market-cap-weighted index when a small group of leaders keeps outperforming. S&P DJI discusses equal-weight and capped approaches in its U.S. equities concentration, mid-caps, and SPIVA discussion.
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Use bonds as part of an appropriate asset mix
Bonds may diversify equity risk, but whether to hold them—and how much—depends on your goals, time horizon, and capacity to absorb losses. They are not a direct substitute for broader stock exposure, and diversification does not make a portfolio risk-free. Vanguard states that diversification does not ensure a profit or protect against a loss.
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| Approach | What it can change | Trade-offs to assess |
|---|---|---|
| International equities | Geographic and currency exposure; dependence on U.S. market leaders | Country and currency risks; possible periods of U.S. outperformance |
| Small- and mid-cap stocks | Company-size exposure beyond the largest firms | Different volatility and performance patterns |
| Equal-weight or capped index strategy | Influence of the largest constituents and the portfolio’s stock and sector weights | Different rebalancing and potential underperformance when market leadership is narrow |
| Bonds | Overall stock/bond mix and exposure to equity risk | Suitability depends on time horizon, goals, and ability to bear losses |
For any fund or strategy, also compare expenses, turnover, tax consequences, account restrictions, and the work involved in rebalancing. Those details vary by product and investor; the cited research does not establish product-specific fees or provide individual tax advice.
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- 40-Pocket Large Capacity Portfolio Book: Each art binder with 40 bound (non-refillable) top-loading clear sheet protectors, letting you show 80 pages of 9x12" letter size or smaller. Folder measures 12 7/8" (L) x 9 11/16" (W) x 11/16" (G).
- Tailor-Made Spine Title: You can label and identify your watercolors, sketches, scrapbook, art pieces, sheet music, certificates, and other projects by customizing the reversible spine insert.
- High Transparency & Lies Flat When Open: Our presentation book with crystal clear PP sheet protectors offers complete transparency for checking through and organizing. Bound sheet protector lies flat when open, free your hands.
- Archival Quality & Heavy Duty: Made from durable and light weight polypropylene which is archival quality, acid-free, non-stick, and non-glare, and water-proof. Thickened and sturdy cover won’t easy to crack and keeps your clear sleeves from being damaged.
- Multi-Function: Not only suitable for long-term storage but also for displaying your paintings, photos, artwork, drawing, stencils. Great gift for students, teachers, office workers, secretaries, musicians, painters, etc.
What an illustrative adjustment can—and cannot—tell you
An August 25, 2026, S&P Global Market Intelligence article modeled reducing the five largest positions in a constructed portfolio by 25%. In that example, their combined weight fell from 27.9% to 20.9%; the article also estimated that more than 8% of total portfolio risk could be reallocated. These are scenario results for that constructed portfolio, not typical outcomes, a forecast, or a recommendation for your holdings. Read the S&P Global Market Intelligence analysis.
Make changes as an allocation decision, not a market call
First decide what concentration you want to address and what broader allocation fits your plan. Then compare the available approaches, including their costs, taxes, and rebalancing needs, before changing holdings. A diversified portfolio can still lose value; the aim is to avoid making its results depend too heavily on a narrow group of companies, not to guarantee a return or time a market reversal.
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