Research What should I do about market concentration?
Key takeaways
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Highest concentration:
Market concentration has been the highest in 45 years because of Magnificent Seven stocks, and more broadly, mega-caps.
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Tech underweight:
The average advisor is underweight tech, and they’re concerned with the absolute percentage in tech, which is over 30%.
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Concentration solution:
Rather than choosing similar sector/factor exposure, look at valuations of various indexes relative to the S&P 500.
Market concentration has been the highest it’s been in 45 years. It’s because of the Magnificent Seven, also called Mag 7 (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla), and more broadly, mega cap (See chart below.)
It has become difficult for advisors to keep up with the amount of tech exposure in passive benchmarks, which has left the average advisor underweight. Advisors aren’t interested in running away from tech but are asking what to pair with tech-heavy strategies. Most use some form of passive investment, like the S&P 500, which has 47% tech exposure. Another popular strategy is the Nasdaq 100, which has over 73% tech exposure.
Even though the average advisor is underweight tech (see chart below), they’re still concerned with the absolute percentage in tech, which is more than 30%. Tech will still have a meaningful impact on total returns, however, whether they're underweight or not.
Considerations
Consider a strategy that has the potential to outperform in different environments rather than choosing similar sector/factor exposure strategies. Valuation dispersions can help guide portfolio diversification. By owning a mix of assets across the valuation spectrum, you automatically include some cheaper, more attractively priced markets. Those differences highlight where long-term opportunities may lie.
Advisor portfolio trends
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Important information
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All investing involves risk, including the risk of loss.
Past performance does not guarantee future results.
Investments cannot be made directly in an index.
This does not constitute a recommendation of any investment strategy or product for a particular investor. Investors should consult a financial professional before making any investment decisions.
Book value is a company’s total assets minus liabilities and intangible assets.
Dispersion measures the degree of uncertainty, and thus risk, associated with a particular security or investment portfolio.
Diversification does not guarantee a profit or eliminate the risk of loss.
The Magnificent 7 stocks refer to Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia, and Tesla.
The MSCI All Country World (ACWI) ex USA Index is an unmanaged index considered representative of large- and mid-cap stocks across developed and emerging markets, excluding the US. The index is computed using the net return, which withholds applicable taxes for nonresident investors.
The MSCI EAFE Index is an unmanaged index designed to represent the performance of large- and mid-cap securities across developed markets, including countries in Europe, Australasia, and the Far East, and excluding the US and Canada.
The MSCI Emerging Markets Index captures large- and mid-cap representation in emerging market (EM) countries.
In general, stock values fluctuate, sometimes widely, in response to activities specific to the company as well as general market, economic and political conditions.
The price-to-earnings (P/E) ratio measures a stock’s valuation by dividing its share price by its earnings per share.
The S&P 400 Index measures the performance of mid-capitalization stocks in the US
The S&P MidCap 400® Value measures constituents from the S&P MidCap 400 that are classified as value stocks based on three factors: the ratios of book value, earnings, and sales to price.
The S&P 500® Index is an unmanaged index considered representative of the US stock market.
The S&P 500® Equal Weight Index is the equally weighted version of the S&P 500® Index.
The S&P 500® Growth Index consists of stocks in the S&P 500® Index that exhibit strong growth characteristics based on three growth and four value factors.
The S&P SmallCap 600® Index is a market-value-weighted index that consists of 600 small-cap US stocks chosen for market size, liquidity, and industry group representation.
The S&P SmallCap 600® Value measures constituents from the S&P SmallCap 600 that are classified as value stocks based on three factors: the ratios of book value, earnings, and sales to price.
The value factor applies to investments trading at discounts to similar securities based on measures like book value, earnings, or cash flow.
A value style of investing is subject to the risk that the valuations never improve or that the returns will trail other styles of investing or the overall stock market.
The opinions referenced above are those of the author as of January 2026. These comments should not be construed as recommendations, but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties, and assumptions; there can be no assurance that actual results will not differ materially from expectations.
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