Perspectives · Risk · 2026

Concentration: when a few names carry the index

Many people assume that owning an index fund spreads risk widely. But when a small number of companies make up a large part of an index, the index behaves like a concentrated bet on them.

On 27 January 2025 a low-cost Chinese AI model prompted a record one-day loss in Nvidia's market value, and the shock reached well beyond one company because so many of the large technology names were exposed to the same story.

Concentration is not wrong. It has rewarded those who held it through long runs. But it should be a choice, made knowing what moves the whole holding.

A simple check: list your largest exposures, then ask which of them would fall together if one idea turned out to be wrong.

General information only; not investment advice. Read the risk warning.