Brian Dress, CFADirector of Research, Investment Advisor, Left Brain Wealth Management, LLC · Wealth Strategy for Corporate Executives & High-Net-Worth Investors | Concentrated Stock & Equity Compensation Planning | Director of Research | CFA | Left Brain Wealth Management

You're Not as Diversified as You Think

11 Aug 2026 · 1 min

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In this Investment Committee segment, Brian Dress, CFA, challenges the common belief that holding an S‑P 500 fund provides true diversification. He explains that modern cap‑weighted indexes are heavily concentrated in a few large companies, meaning investors may be overexposed to past winners and blind to future opportunities. Nolan adds that while the S&P offers broad exposure, many individual stocks have delivered over 100% year‑to‑date returns, and allocating to such outliers can materially boost portfolio performance—something the index may miss. Dress urges viewers to examine where risk is truly concentrated in their own portfolios and consider whether they are positioned for the next wave of market leaders. The segment concludes with a call to watch the full episode and subscribe for more quarterly discussions.

One misconception we hear all the time is that owning an S&P 500 fund automatically means that you're broadly diversified. Index investing has been an incredible wealth-building tool over time, but today's indexes are more concentrated than many investors realize. And there's a second problem that gets talked about even less. Nolan, if a handful of companies make up that much of the index, is the risk not just concentration, Or investors also missing what comes next?
I think you hit it. You know, obviously if you own the S&P 500, you can get broad-based exposure and you're going to be decidedly average. But as we've noted, if we're looking at our, our second half and year-to-date leaderboard, Brian, we've seen many companies with year-to-date returns above 100%. And if I can find some of those and evaluate them, if I can own them in a decent size, they can make an outside impact on my portfolio return. Maybe in a way the S&P can't.
And that's the part that people miss. It's not only that you're more concentrated than you think, but it's also that it's a cap-weighted index built to reflect yesterday's winners, which means that it's often the last place you're going to look to find tomorrow's winners. Take a look at your own portfolio and ask yourself one question: Where's my risk actually concentrated? And is it exposed to what's coming next? If you found this helpful, watch the full Investment Committee episode and subscribe for more quarterly discussions.