The S&P 500 Is More Top-Heavy Than Ever—What Advisors Should Know

Khurram10716202

In 2024, the top 10 companies in the S&P 500 accounted for 37% of the index’s value—a level three standard deviations above the historical average of 21.5%. This level of overconcentration is unprecedented in recent decades and represents a structural shift in market dynamics.

Our research at the College for Financial Planning examined concentration trends from 1979 to 2024 and compared the performance of the top 10 companies with the full index. We found:

• Returns vs. Risk: Since 2018, the top 10 stocks have outperformed the broader index, but risk-adjusted returns (Sharpe ratios) remain nearly identical. The extra reward comes with extra volatility.
• Historical Context: Similar levels of concentration were seen in the 1950s and 60s—when AT&T, GM, and U.S. Steel dominated. That era reminds us that high concentration often signals market shifts, not necessarily imminent crashes.
• Sector Dependence: Today’s dominance is concentrated in technology, leaving investors exposed to sector-specific downturns.
• Planning Implications: Overconcentration can make client portfolios more vulnerable. Equal-weighted indices, mid/small-cap exposure, and international diversification are tools to reduce this risk.

Advisor takeaway: Index funds remain powerful, but today’s “top-heavy” S&P 500 requires a fresh look at diversification strategies. Helping clients understand concentration risk is key to managing volatility and achieving long-term goals.