[jackconsidine]

Point taken but I think it's a bit of a fallacy to frame this way. The market can go up and down as can individual stocks; "85% of the decline" doesn't make sense because some stocks are going up.

A book I read a few years ago put this more eloquently. Some governor said that 20,000 jobs were created last month and his state contributed half of them. Well, many states lost jobs and the state next door actually gained MORE jobs, so the "more than half" framing makes no sense

[cj]

I wouldn't say it's a fallacy. It's just an interesting way to look at the data.

I think more people need to be talking about the fact that the S&P 500 has extreme concentration risks that didn't exist 15+ years ago (and the Chart of the Day demonstrates that). We're in uncharted territories re: market cap concentration.

[dangus]

It becomes less interesting the more the “overweight” stocks correct.

The extreme concentration risk lessens as these 8 stocks fall in value compared to the rest.

I also don’t personally see the risk in the concentration. Risk of what? These companies are legitimately larger and doing more business than other firms.

Pick a median consumer. Which company are they sending more profit to than companies like Apple or Amazon?

10 years ago the average consumer maybe bought an iPhone from Apple every 3 years, so they gave Apple less than $100 of pure profit dollars per year.

Now that same consumer is giving Apple money for the iPhone, but also spending on services that they weren’t buying 10 years ago. If they’ve got an Apple One subscription they’re now sending Apple double or triple the profit they used to get.

These companies are big because they sell more things and are more diversified than they were in the past.

There’s no concentration risk. I’d actually argue that the concentration risk can be resolved overnight through antitrust regulation (e.g., force Apple and Amazon to split into multiple companies, as they already have obvious verticals that could stand alone).

[keernan]

The concentration risk relates to diversification in investing. Index funds are generally thought of as a way to diversify a portfolio. Cap weighted index funds are generally preferred because they are cheaper for the provider to maintain. Compare VOO with RSV for example. VOO is cap weighted. RSV is equal weighted - which means investors in RSV bear the cost of periodically readjusting all holdings so they are once again equally weighted - something no necessary with VOO.

I am not the only investor who has taken steps to offset the overly high concentration in the SP500 that raises the riskiness of an investment portfolio. I've done so by splitting my VOO holdings in half, split 50/50 VOO/VTV that strategically diminishes the impact of the high top 10 stocks in the SP500.

[dangus]

I certainly think it's a good thing to diversify investing, while recognizing that there is value in putting a lot of your bets into heavyweights that are very likely to do very well in the long term.

One of my main points here is that dumping a lot of money into one company isn't always something that represents lack of diversity in your investment dollars.

A company like Microsoft has its hands in so many business verticals that its stock by itself is a highly diverse asset.

I also think it's important to realize that massive companies like these have inherent advantages over smaller ones. A company like Framework literally cannot make a better laptop than Apple even if an angel investor dropped billions of dollars into their laps. Even if they pulled it off, it wouldn't come with a free trial for Apple's content subscriptions and other revenue-maximizing features, and the wholesale price they get from the factory can't match Apple's margins on the device until they convince a large enough mass of people to buy them.

That's the kind of stuff that big companies can do, and that's why they are worth more putting more bets into than smaller ones.

Obviously, companies like Tesla and Nvidia are far bigger risks in the S&P 500, but they represent a small minority of those giants.

[keernan]

There is nothing wrong with your desire to 'dump[ing] a lot of money into one company'. That is easy to do without an index fund. And it is not the investing theory behind the creation of index funds and their investing purpose. When 8 companies dominate an index fund, that means the index is not performing the intended function for which it was created.

[dangus]

But the index fund is doing what it was designed for, which is to index on the companies based on their relative importance in the marketplace.

And that’s really my whole point. Someone who is buying an S&P Index fund wants to own more Apple than GoDaddy, because Apple represents much more economic activity than GoDaddy.

[cj]

I wonder what a solution could look like. Perhaps keep the market cap weighting, but cap the weighting at a max $500b (or some sliding scale to prevent the top X stocks from composing more than Y% of the portfolio)

[chiph]

I think the point was that those stocks are causing the S&P to be overweight towards those firms that are highly invested in AI. It's like comparing personal wealth when Warren Buffet and Bill Gates are included in the list - the average ends up far above the median.

[toomuchtodo]

Yes.

Citations:

Apollo Academy: S&P 500 Concentration Approaching 50% - https://www.apolloacademy.com/sp-500-concentration-approachi... - March 14th, 2026

> The 10 biggest companies in the S&P 500 make up almost 40% of the index, and if Anthropic, OpenAI and SpaceX are added later this year, the concentration could approach 50%, see chart below. The bottom line is that the S&P 500 basically doesn’t offer much diversification anymore.

Apollo Academy: Extreme AI Concentration in the S&P 500 - https://www.apolloacademy.com/extreme-ai-concentration-in-th... - January 13th, 2026

> The bottom line is that investors in the S&P 500 remain overexposed to AI.

TLDR Concentration risk https://www.finra.org/investors/insights/concentration-risk

(not investing advice)

[themafia]

> The market can go up and down as can individual stocks

Literally the main reason we even have indexes.

> "85% of the decline" doesn't make sense

85% of the decline represented by the overall index.

> so the "more than half" framing makes no sense

It makes perfect sense. It's just misleading.

[thinkling]

A similar explanatory mirage happens in elections: when a candidate loses by (say) 1% of the vote, people go looking for factors that produced a 1% swing and declare, “it’s because of inflation! it’s because they took position X! it’s because the other team focused harder on turnout!”. You can find several such explanations and no single one is the causal one.

[a_ba]

I don’t think it’s misleading (at all) when you take into account that the index is volume weighted. If you held two different stocks: 1 from megacorp worth 90; 1 from smallcorp worth 10; if megacorp is down 10% while smallcorp is up 10%. Your portfolio would still be worth less even though 50% of your portfolio positions are up.