Do You Already Own 36% of the Market in 10 Stocks? What to Do About It

Your broad market fund may be more concentrated than it looks

Yes-even a so-called diversified fund can be heavily concentrated.

The Morningstar US Market Index top 10 now weigh 36%, up from 23% just five years ago. Morgan Stanley measures the same group at 33% of overall market value and 37.5% of the MSCI USA index. In other words, buying one broad "set it and forget it" fund can still leave you with far more exposure to a handful of companies than many investors realize.

The trade-off behind a one-fund portfolio

The case for this setup is straightforward: a broad index is simple, and if the biggest companies are still the strongest at turning innovation into cash, then owning them can continue to support returns. Concentration is not automatically a problem.

The risk is what happens if that leadership group stumbles. In one recent session, the S&P 500 lost about $1 trillion in market cap, and the five largest companies accounted for around 50% of that loss. A concentrated market portfolio can still work as leadership holds, but it also leaves less room for error when sentiment turns.

Why concentration can feel safe while making risk more concentrated

Concentration can be rational, but it still changes how your portfolio behaves.

How a cap-weighted fund can amplify the largest stocks

In a market-cap-weighted index, bigger companies get bigger allocations. That means a lot of the portfolio's performance can depend on a very small number of names, even if you bought the fund for broad exposure. As Morningstar has framed it, concentration does not have to imply a bubble or an imminent crash; it can simply mean your market portfolio is less diversified than it used to be.

That is the practical shift investors need to notice. A broad index can still be a sensible core holding while also becoming more of a bet on a narrow leadership group.

This is not only a U.S. mega-cap issue

The same concentration problem shows up in other markets, too. In South Korea, Samsung accounts for about 20% of its benchmark. In Taiwan, TSMC is roughly 40%. Together, they make up about a fifth of the MSCI Emerging Markets Index. Investors who think they are avoiding U.S. mega-cap risk may still be carrying similar concentration elsewhere.

AI makes the concentration more noticeable

The bigger concern today is not just size; it is theme overlap. Reuters notes that current concentration is heavily tied to AI, and Morningstar says the heaviestweights in the U.S. are Almost all are tied to AI. That does not automatically make the theme weak. AI is still supporting growth expectations, and improving fundamentals elsewhere suggest the market is not entirely narrowed to one story.

Still, many broad indexes now carry more of a single economic thread than most investors assume. That lowers the diversification cushion without necessarily signaling a crash.

Should you own more, fewer, or the same large companies?

The practical answer is not "all in" and not "get out completely." It is to be honest about what your portfolio is doing.

If the largest companies are still driving earnings and productivity, a broad market position can remain reasonable. But once your portfolio starts to look more like one thematic bet than a household balance sheet, the question changes from whether the big stocks are good companies to whether you already have enough exposure to them.

When staying invested still makes sense

If you already own a broad index fund, staying put can still be sensible if the bullish case holds: the biggest companies continue to deliver, and leadership broadens enough that the market is not depending on one story alone. In that setting, the large pieces are still doing a lot of the work for the portfolio.

When to stop adding and reassess

You should be more careful before adding more if your goal is diversification but your result is concentration. A market portfolio where the top 10 are less diversified than in the past can still perform well, but it is weaker as a true hedge if one theme ends up driving most of the returns-or the losses.

Reassess your position if any of the following are true: - Your main exposure to large companies is already running through one dominant theme. - New contributions would increase that concentration further. - You would feel uncomfortable if the current leadership group became the main source of downside.

The core self-audit is simple: if the top 10 are already doing roughly 36% of the work in your portfolio, are you comfortable letting those same companies do 36% of the portfolio's dirty work?