Lately, there’s been a lot of chatter about today’s biggest companies taking up “too much” space in the S&P 500.

As of July 31, the ten largest companies accounted for roughly 39% of the index’s total market cap.

Critics have been calling this a serious risk for years.

But so far, it hasn’t played out that way—except for those who avoided these dominant companies out of fear, only to miss out on their gains.

Is Market Concentration a Long-Term Risk?

High market concentration is nothing new.

In the 1960s and ’70s, the “Nifty Fifty” made up about 30% of the index.

In 2000, tech and telecom pushed the top 10 to over 20%.

Those figures are lower than today’s 39%, but still historically top-heavy.

And here’s an important point: none of the companies from the ’60s or ’70s remain in today’s top 10.

As of 2000, only Microsoft and Walmart remained on the list.

With all this turnover at the top, you might expect poor long-term returns after those peak concentration periods.

Not so.

• Since 1965: The market’s real (above-inflation) return has averaged about 6% per year.
• Since 2000: About 5% per year.
• Long-term average over the past century: Around 7% per year.

In other words, performance following high concentration periods has been roughly in line with history and well above inflation.

Yes, there were rough patches of volatility.

But over the long haul, concentration hasn’t been the drag some feared.

It’s tempting to think you can sidestep any turbulence ahead.

But the only way to be certain you capture the full upside is to endure all the volatility along the way.

It’s why we always say: time IN the market—not timING the market—is what matters most for reaching long-term goals.

Market concentration isn’t necessarily a symptom of something “broken.” Often, it reflects what’s working.

As consumer preferences shift, industries rise and fall, and the market reallocates capital to the most productive companies.

Consider this: today’s top 10 companies—those representing 39% of the index—generate 32% of its total earnings.

That’s nearly a third of all earnings from just 2% of the companies.

The scale and profitability are remarkable.

Could these companies stumble?

Absolutely.

Will they eventually be replaced at the top?

History says yes.

But predicting when is nearly impossible, and betting on that timing is where the real danger lies.

Bottom Line

Instead of trying to forecast and trade around these shifts, the wiser move is to own a diversified portfolio that includes today’s giants.

This lets the winners keep compounding, the laggards fade, and, most importantly, time do the heavy lifting.

Just as it always has.

Market concentration makes headlines, but history shows it’s rarely the long-term threat it’s made out to be.

The bigger risk is believing you (or anyone!) can successfully time the rotation.

Stay diversified, stay invested, and let the market work for you.

📚 What I've Been Reading

• Planning for the Inevitable Trends Shaping Our World (Polymath Investor)
• Why Men Need to Plan Differently for Retirement (Kiplinger)
• What's Your Money Story? (The Art of Wandering)
• How to Fill the Need for "What's Next" in Life (Mr Stingy)
• This Is Not the First Time Americans Felt the World Was Changing So Fast (Derek Thompson)
• How (Dog) Doodles Became a Business (Bloomberg)
• How America Got Its Baby Back, Baby Back, Baby Back (Slate)

Thank you for reading!

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Stay wealthy,

Taylor Schulte, CFP®