Concentration Risk Continues: Why Now's the Time to Diversify

Concentration risk is high, with the top 10 of the S&P 500 making up just under 40% of that index. QINT provides ex-U.S. quality stock exposure, which helps investors to diversify away from U.S. concentration risk. The ETF has outperformed its category average over the past year with a 22.7% gain, making it a compelling option.

Recent analysis suggests that the top 10 holdings comprise just under 40% of the S&P 500 right now. That marks a notable increase from 26% in spring 2023. Should those top names begin to teeter, or worse, actively sell off, heavily concentrated portfolios would feel the impact acutely.

Rather than continue to add U.S. equities exposure, it may be worth considering international equities. The American Century Quality Diversified International ETF (QINT) holds a special place in that realm, combining international equities with a quality screen. Charging 34 basis points, QINT tracks the American follows the American Century Quality Diversified International Equity Index. In doing so, it targets large and midcap stocks outside the U.S. The index emphasizes a few important metrics like strong financials, growth prospects, and attractive fundamentals. Depending on market conditions, too, the quality international equities fund shifts between value and growth.

QINT has returned 22.7% over the past 12 months, according to ETF Database data. That return allowed the fund to outperform its ETF Database Foreign Large Cap Equities category average over the same period. What’s more, per YCharts data, the fund’s price is close to rising past its 50 and 200-day Simple Moving Averages (SMAs), a classic buy signal. Taken together, these factors combined make QINT an appealing option to balance portfolios against rising U.S. market concentration.