What Is Concentration Risk in ETFs?

By Adam Patti, Chief Executive Officer, VistaShares | Published November 13, 2026

Concentration risk in an ETF is the risk that a small number of holdings, sectors or countries drive most of the fund’s results. A fund can hold hundreds of securities and still be concentrated if a few positions carry a large share of its weight. The main measures to check are the weight of the top 10 holdings, the biggest single positions, sector and industry weights, and geographic exposure, along with how those combine across an entire portfolio.

Why can a diversified fund be concentrated?

Diversification depends on how assets are spread, not only on how many securities a fund owns. In a market-capitalization-weighted index, each company’s weight reflects its market value. When a few companies grow much faster than the rest, they come to represent a larger share of the index.

That has happened in the U.S. market. According to S&P Dow Jones Indices data as of September 30, 2026, the top 10 constituents of the S&P 500 made up 39.1% of the index, and the biggest single constituent carried an 8.4% weight.¹ RBC Wealth Management reported that the top 10 weighting reached a record 40.7% in 2025, after hovering around 18% to 23% between 1990 and 2015.² A fund tracking that index owns about 500 companies, but its results depend heavily on a small group.

What should investors measure?

Top 10 weight. The combined weight of a fund’s 10 biggest holdings is a simple, widely available measure. A high figure means a few positions drive much of the fund’s behavior.

Single-position size. The biggest individual holding shows how much one company can affect results. Some funds cap individual weights; others do not.

Number of holdings. A fund with 30 holdings is typically more concentrated than one with 500, though weighting matters more than the count.

Sector and industry weights. A fund may be concentrated in one sector, such as technology, even if its individual positions are modest. Industry concentration within a sector, such as semiconductors within technology, adds another layer.

Geographic exposure. International funds can be concentrated in a few countries, and global funds are often dominated by U.S. companies.

Factor tilts. Funds may lean toward growth or value, large or small companies, or high or low volatility, which concentrates exposure to particular market conditions.

How has concentration changed over time?

Concentration in broad indexes is not fixed. RBC Wealth Management has noted that the top 10 weighting of the S&P 500 stayed in a range of roughly 18% to 23% between 1990 and 2015 before rising sharply over the following decade.² Periods of high concentration have occurred before, and concentration can decline as leadership broadens or as the biggest companies lag. Because weights shift with prices, the concentration of a market-cap-weighted fund rises and falls without any change in the fund’s rules. Investors who checked a fund’s concentration years ago may find it quite different today, which is a reason to review concentration measures periodically rather than relying on an earlier impression of a fund.

How do single-stock and thematic funds fit in?

Some ETFs are concentrated by design. Single-stock ETFs provide exposure to one company, often with leverage or an options strategy. Our article on single-stock ETFs explains them. Sector and thematic ETFs focus on one industry or trend and often hold a limited number of companies. Our article on how to evaluate a thematic ETF covers purity and concentration within themes.

Concentrated funds can serve a purpose, such as targeted exposure, but they carry more company-specific and industry-specific risk than broad funds.

How does concentration add up across a portfolio?

Concentration often builds across funds rather than within one. An investor who holds a broad U.S. index fund, a growth fund and a technology fund may own the same top companies three times. Each fund may look reasonable on its own, but the combined exposure to a few companies can be substantial.

Looking through to the total portfolio, adding up each company’s weight across all funds, shows true exposure. Our article on ETF portfolio overlap explains how to measure shared holdings.

What are the risks of concentration?

Company-specific events. Disappointing results, regulatory action or competitive changes at a single large holding can move the whole fund.

Correlated holdings. Concentrated positions in one industry may respond to the same drivers, such as technology spending or interest rates, so they can fall together.

Valuation risk. When a few companies grow to dominate an index, their prices may reflect high expectations.

Sector cycles. Sector-concentrated funds depend on the fortunes of one part of the economy.

Concentration can also work in an investor’s favor when the concentrated holdings do well. The point is to understand the exposure and decide whether it matches the investor’s goals.

How can investors manage concentration?

Choose weighting methods deliberately. Equal-weight funds give each holding the same weight at each rebalance, reducing the influence of the biggest companies. Our article on equal-weight versus market-cap-weight ETFs explains the trade-offs.

Use funds with position caps. Some indexes limit any single holding to a set percentage.

Diversify across styles, sizes and regions. Adding small-cap, value or international exposure can broaden a portfolio. Our article on international and emerging-market ETFs covers global exposure.

Rebalance. Periodic rebalancing trims positions that have grown beyond their targets. Our article on rebalancing an ETF portfolio explains common approaches.

Review the core and satellites together. Our article on core and satellite investing describes how to structure a portfolio so satellite funds add distinct exposure.

More introductory topics are covered in our ETF basics guide. Investments involve risk, including possible loss of principal.

Frequently asked questions

What is a high top-10 concentration for an ETF?

It depends on the fund type. Broad market funds historically had top 10 weights around one-fifth of the portfolio, though that has risen. Sector and thematic funds often exceed half. Comparing a fund with others in the same category, and with the investor’s other holdings, gives useful context.

Is the S&P 500 still diversified?

It holds about 500 companies across all sectors, so it remains broadly diversified by count and sector. However, its biggest companies now carry an unusually large share of its weight, with the top 10 near 40% in recent data. That means a small group of companies drives much of its behavior.

How do I find a fund’s top holdings and sector weights?

Most ETFs publish holdings daily and sector breakdowns on their websites and fact sheets. Brokerage and research platforms also show top holdings, sector weights and geographic exposure. Fact sheets are often updated monthly or quarterly. The fund’s website usually has the most current figures.

Does an equal-weight fund eliminate concentration risk?

It reduces concentration in the biggest companies but does not eliminate other forms. Equal-weight funds tilt toward smaller companies and can still be concentrated in sectors that have many members. They also rebalance more often, which affects turnover and costs.

Should I avoid concentrated ETFs?

Not necessarily. Concentrated funds can provide targeted exposure to a sector, theme or company. The key is sizing them appropriately and understanding how they add to concentration already present in the rest of the portfolio. A financial professional can help assess the fit.

Cite this page: Adam Patti, "What Is Concentration Risk in ETFs?," VistaShares, updated November 13, 2026, https://www.vistashares.com/etf-concentration-risk/. Plain-text version.

This material is provided for educational purposes only. It is not investment, legal or tax advice, and it is not a recommendation or an offer to buy or sell any security. Information is drawn from sources believed to be reliable as of the date of publication, is not guaranteed as to accuracy or completeness, and may change without notice. Figures attributed to third parties are their estimates. Projections and forecasts are not guarantees of future results. Investors should consult their own financial, legal and tax professionals before making investment decisions. Investments involve risk, including possible loss of principal. ETF shares are bought and sold at market price, which may differ from net asset value, and brokerage commissions and other trading costs may apply.