Market concentration is a big talking point, especially when we look at ETFs.
The basic concern is this: if only a handful of shares make up a large part of an index, then are you really diversified? For example, if the top 10 shares in an index make up half the total value, and one of them falls hard, the whole index can take a knock.
But here’s the important thing, this is not new.
Johann Biermann Tweeted the chart below that shows the Top 40 index over the last 35 years. Except for 1990, the top 10 shares have always made up more than 50% of the index. And yet, Top 40 ETFs have performed perfectly well over the long term.
Top40 Concentration
Yes, in some indices like the Indi25 and Resi10 there are caps on how large any one share can be. But those caps exist mainly for fund managers who benchmark performance, and because of CIS regulations, not because index providers are trying to protect retail investors.
What does matter locally is that the excellent gains so far in 2025 are mostly from the precious metal miners and I did a podcast last week on that risk. If gold sells off, so will our market.
What of the US?
Now, compare this to the US. A recent Tweet from Charlie Bilello shows that the top 10 shares in the S&P 500 now make up just over 40% — the highest level since 1980.
S&P500 Concentration
Should we panic?
No. Panic never helps.
But it does show how a small number of shares, mostly connected to AI in the US and precious metals locally, are driving the rally. And in the US not all of the top 10 are tech: Eli Lilly, Berkshire Hathaway and JP Morgan are also in the top 10 mix. They’re also all profitable businesses, and valuations aren’t completely wild, but concentration does add risk.
I would also add that this concentration is what has made much of the profits on the way up, so it cuts both ways.
So, am I selling?
No. I don’t own pure S&P 500 ETFs. I buy broader global ETFs like 10X Global as my preferred One ETF to Rule them all. Those still have the same big US names in the top 10, but because the US is around 75% of the global index, their weighting comes down to about 30%, not 40%.
The key point: markets change. Right now, AI and tech are leading and in South Africa it is gold and PGMs. They’ve helped push markets higher, and they’ll likely be part of the next downturn too. That’s how cycles work.
If this totally freaks you, then consider equal weight ETFs or more global ETFs, but be warned. They have under performed the market cap weighted ETFs forever.
For me, I have plenty time and we’ve seen this before and survived just fine. So I stay the course, and don’t panic.
ETF blog
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.
