Concentration inside “broad” ETFs: top-10 and sector risk (with an example)
Published: 2026-05-25
Broad index ETFs are a great default. But “broad” doesn’t automatically mean “evenly diversified”. In cap-weighted indexes, a small number of mega-companies (and one hot sector) can quietly become a big part of your portfolio.
What to check (the 2 fast numbers)
- Top-10 weight: what % of the ETF is in the 10 biggest holdings?
- Sector weight: what % is in the biggest sector (often Information Technology)?
You can usually find both in the ETF factsheet (or on the issuer’s website) in under 2 minutes.
Why this happens (and why it’s not automatically “bad”)
Most popular equity ETFs track market-cap weighted indexes. When a company becomes very large, it becomes a larger part of the index. If a sector is where the biggest companies live, that sector’s weight rises too.
That’s not a bug — it’s how the market is priced today. The risk is psychological and practical: when a few names dominate, your “broad” ETF can start behaving more like a bet on those names (and that sector) than you expected.
A toy example (how the same ETF can feel different)
Imagine an ETF where the top 10 holdings are 25% of the fund, and Technology is 28%. If the tech sector has a bad year, your “broad” ETF will feel very tech-heavy, even if it holds hundreds or thousands of stocks.
Beginner rules of thumb (keep it simple)
- If top-10 is high, accept that you own a lot of “the biggest winners” — don’t be surprised by that.
- If one sector is huge, avoid adding extra sector ETFs that double-down on it (this is how accidental concentration happens).
- Don’t “fix” concentration with random complexity. If you want to reduce it, the cleanest tool is often a broader global ETF (vs a single-country ETF), not a pile of satellites.
The practical takeaway
Before you buy, glance at top-10 and sector weights. If you’re comfortable with them, you’re done. If you’re not, change the one ETF you’re buying — not the whole portfolio.