S&P 500 Concentration Risk: What to Know Now

The S&P 500’s top 10 stocks now make up ~40% of the index. VEFA seeks to provide developed international exposure with an analyst sentiment tilt, which may help reduce concentration risk. For investors using the S&P 500 as their primary equity allocation, a small number of mega-cap stocks now account for nearly 40% of the index, driving most of their returns and, in a downturn, most of their losses (VanEck, May 2026). Investors who have focused strictly on the US over the past decade have been rewarded with strong returns, but past performance is not a guarantee of future results, and a portfolio concentrated in a handful of names carries risks that broad diversification is designed to reduce. Concentration risk occurs when portfolio returns are heavily dependent on a small number of stocks, sectors, or geographies. The S&P 500 itself is structurally concentrated at the index level, meaning even a passive allocation is top-heavy by design. While that concentration has rewarded investors over the past decade, holding only S&P 500 exposure means there is no buffer if that trend reverses. Concentration is not inherently bad, but it should be intentional. What was once a broadly diversified index has become increasingly top-heavy. A decade ago, the top 10 S&P 500 stocks accounted for roughly 18% of the index (VanEck, May 2016).