10 Companies Now Make Up Nearly Half the S&P 500 And You Never Decided That
If you’re within a few years of retiring, the statement that showed up this month is probably the best you’ve ever seen.
The biggest number that’s ever appeared next to your name.
That isn’t luck. You saved through 2000. You saved through 2008. You saved through 2020.
Most people didn’t. You did.
So nothing here is a criticism of how you got where you are.
But I want to ask you something most people are never asked.
When was the last time anyone showed you what’s actually inside the funds you own?
Not the balance.
What’s in there, and how much of it sits in how few places.
Because something changed while you were getting here. And it didn’t require you to do anything at all.
The Word Everyone Skips
The S&P 500 is the shorthand for a diversified portfolio. 500 companies, across every industry.
If one goes bad, you own 499 others.
It’s a core holding in a huge number of retirement accounts, and “just buy the index” became the most repeated piece of financial advice of the last 30 years.
That advice built real wealth. For a lot of people, including a lot of my clients.
But there’s a word in there almost everyone skips past.
Weighted.
You don’t own 500 equal slices.
You own each company in proportion to its size.
Which means as a handful of companies grow enormous, they quietly take up more and more of what you own, without you buying or selling a thing.
41 cents of every dollar
Here’s what that looks like in plain numbers.
At the end of last year, the 10 largest companies in the index made up close to 41% of it.
That figure moves with the market, but that’s the neighborhood.
A decade earlier, it was about 19%.
At the peak of the dot-com era, the moment we still hold up as the example of a market that got too narrow, it briefly touched around 27%.
So by this measure, the index today is more concentrated than it was then.
And it happened gradually enough that nobody ever got a notice about it.
Sit with that.
You own 500 companies. You always have.
But roughly 41 cents of every dollar now sits in 10 of them.
And the year you’re most exposed to those 10 is the same year your statement looks the best it ever has.
Those are the same fact.
Why Nobody Told You
So why didn’t anyone warn you?
Because technically, nothing happened.
There was no transaction. No decision. Nothing to sign.
No event to report, so no letter to send.
The risk inside your account changed without ever generating a piece of paper.
And there’s one more place this hides.
If your 401(k) sits in a target-date fund, the kind named after the year you plan to retire, you should know those aren’t all built the same way.
Some hold broad US index funds carrying heavy exposure to those same 10 names.
Others use different benchmarks, active managers, international stocks, entirely different asset classes.
The retirement year on the label doesn’t tell you what’s inside it.
You have to open it up and look.
Standing still isn’t staying the same.
I sat with a couple recently, both in their early 60s.
The husband said something I’ve thought about since.
“I’ve been in the same three funds since 2011. I haven’t touched a thing.”
He was right. He hadn’t. And that was the whole problem.
He thought standing still meant staying the same. It doesn’t.
These were people who followed the advice exactly as it was handed to them, bought the index, held on, didn’t panic.
Every single thing the industry told them to do, they did.
And the concentration underneath it changed anyway.
That shouldn’t be how this works.
The Top-Heavy Test
Here’s what to actually do about it.
It takes about 20 minutes.
First, find out what you own.
Pull up your largest retirement account, find the fund, and look for its top 10 holdings, every fund publishes it, usually on the first page of the fact sheet. Write down that percentage.
Second, find your overlap number.
Most people have three or four accounts and assume they’re spread out because they’re at different companies.
Write down the top 10 in each, then compare the lists.
Count how many names appear on every one. If it’s 7, 8, 9 of the same names across all of them, you don’t have four positions.
You have one position, held four times, in four envelopes.
A low number isn’t proof you’re diversified, plenty of things still move together, but a high number is a flag, and it’s one you can find in 20 minutes without anyone’s help.
Third, count what isn’t in those 10 names.
Add up the money that has nothing to do with the concentrated block, cash, money market, bonds, anything you could spend next year without selling a share of those 10 companies.
Divide it by what you spend in a month.
That gives you a number of months.
And that number answers the only question that really matters: if those names had a bad first year while you were taking money out, how long could you leave them alone?
I won’t hand you a target.
The right number depends on your pension, your Social Security, how flexible your spending is, what else you hold.
That’s the conversation, not the worksheet.
But the number itself tells you whether a bad stretch would put you on the market’s schedule, or leave you on your own.
The Thing About The Second Question
I’m not forecasting.
I have no idea whether those 10 companies have another great decade or a terrible one.
Anyone who claims to know is selling something.
The point is that your plan should have an answer either way.
Most have only been tested against one of the two futures, the good one.
So look at your statement. Enjoy it.
You earned it, over decades, through three crashes most people fled.
Then ask the second question.
In 25 years, I’ve watched two kinds of people read a good statement.
Some ask what’s underneath it. Everyone else feels finished.
On a good day, those two people feel exactly the same. On a bad one, they don’t.
Standing still isn’t the same as staying the same.
And a plan that’s only been tested against the decade that just happened hasn’t really been tested.
If you’d like help looking at what’s actually underneath your own accounts, not a general example, yours, schedule a Retirement Resilience Assessment at jonathanpeters.net/consultation.
Best regards,
Jon
Sources
rbcwealthmanagement.com, The Great Narrowing →
Apollo’s research puts the top 10 at 40% of market capitalization, useful as a cross-check.
apolloacademy.com, Extreme Concentration →
Visual Capitalist notes the share has edged down slightly from its peak, worth reading before settling on a number.
visualcapitalist.com, the S&P 500 in one chart →
S&P Dow Jones Indices explains the weighting method that causes the concentration in the first place.
Coverage of target-date funds growing more equity-heavy, supporting the point that the concentration arrives automatically inside the fund most people hold.
thedailyupside.com, target-date allocations →
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