Is My Portfolio Too Concentrated? A Simple Check Most Investors Skip
Concentration usually does not arrive with a warning. A stock doubles, a technology ETF keeps outperforming, or US equities quietly become the dominant part of a European portfolio. Nothing feels wrong because the positions that created the concentration were often the positions that worked best.
There is no universal 'safe' percentage
Rules such as 'never let a stock exceed 10%' can be useful guardrails, but they are not laws of finance. A 10% position in a highly volatile, leveraged company can contribute more risk than a 15% position in a stable business. The correct question is not only how large the weight is, but how much damage the position can do under a plausible adverse scenario.
A simple example makes that concrete. If 20% of the portfolio sits in one stock and that stock falls 40%, the direct hit is about 8% of the entire portfolio before considering knock-on effects elsewhere. Decide whether that is tolerable before the event, not after it.
Check the portfolio in four layers
First, single names. Rank positions by weight and identify which three holdings drive the largest share of portfolio value.
Second, sectors and themes. Fifteen separate tickers can still be one trade if most of them depend on the same economic driver - semiconductors, luxury demand, interest rates or European banks, for example.
Third, geography and currency. A Swiss investor can hold an account denominated in CHF while the underlying businesses generate most of their economics in USD. Account currency, listing currency and economic exposure are different things.
Fourth, look through ETFs. A global ETF plus an S&P 500 ETF plus a Nasdaq-100 ETF may appear diversified at fund level while repeatedly owning the same mega-cap companies underneath.
Concentration can exist outside the brokerage account
One of the most important exposures is often ignored: your job. If your salary, pension, employer shares and investment portfolio all depend on the same industry or country, the household is more concentrated than the brokerage statement suggests.
The same applies to property. A homeowner with most of their net worth tied to one local housing market may reasonably want the liquid portfolio to diversify away from that geography rather than reinforce it.
The point is not to eliminate concentration
Concentration is not automatically bad. Every active view creates some form of concentration, and some investors deliberately accept it because they believe they have an edge or because the position serves a specific objective.
The failure mode is accidental concentration: a risk that became large through drift and was never consciously accepted.
A five-minute review
Write down the largest stock weight, largest sector weight, largest regional exposure, largest currency exposure and the top overlapping holdings across your ETFs. Then ask one question for each: if this exposure moved sharply against me, would I still consider the portfolio consistent with my plan?
If the answer is no, you have a rebalancing question. If the answer is yes, you have at least converted an accidental risk into a deliberate one. That distinction matters.