Check How Concentrated Your S&P 500 Fund Really Is

Matthew Leo · Published October 23, 2026 · Guides

An investor compares two fund fact sheets at a dining table in an illustrative scene.

The S&P 500 has risen about 14% in 2026, but the headline hides a much narrower market. A Reuters analysis of LSEG data found that more than 200 current index members were down for the year while the median stock had gained about 4%.

A broad index fund can still be a sensible holding. The useful question is not whether concentration is automatically bad. It is whether you understand how much of your portfolio depends on the same companies and sector.

This guide is general information, not a recommendation to buy or sell an investment.

Start with the index, not the fund name

The S&P 500 is weighted by float-adjusted market capitalization. Larger companies therefore have more influence on its return than smaller members. S&P Dow Jones Indices says the index covers about 80% of available U.S. market capitalization. On October 12, its official page showed the 10 largest constituents at 39.1% of the index.

That is why “500 companies” does not mean each company contributes one five-hundredth. A strong move in a handful of very large stocks can lift the index while many members fall.

Open the ETF Facts document

For a Canadian-listed ETF, find the latest ETF Facts document on the provider’s site. Check the publication date first. The document is updated annually or after a material change, so compare it with the provider’s more recent holdings page if one is available.

The Ontario Securities Commission’s investor-education site explains that ETF Facts shows the fund’s 10 largest holdings as percentages of net asset value. It also shows the investment mix, risk rating, fees and intended investor.

Write down these labelled values:

Top 10 holdings: total percentage of the fund represented by its 10 largest positions.
Largest holding: company name and portfolio percentage.
Largest sector: sector name and portfolio percentage.
Number of holdings: useful context, but not a substitute for weights.
Fund objective: the index or strategy the ETF is designed to track.

Check for overlap across your accounts

Concentration can appear twice. A Canadian investor might own an S&P 500 ETF, a technology ETF and an all-equity asset-allocation ETF that each hold many of the same U.S. companies.

Repeat the top-holdings check for every large fund in your TFSA, RRSP, FHSA and non-registered accounts. Registered account labels change tax treatment; they do not diversify the investments inside them.

For each repeated company, estimate the exposure by multiplying the fund’s weight in your portfolio by the company’s weight in that fund. For example, if a fund is 40% of your portfolio and one company is 8% of that fund, the indirect exposure through that fund is about 3.2% of the portfolio. Add exposure from other funds and direct shares.

This is an estimate. Fund weights move with markets and can differ between the ETF Facts date and today.

Separate company, sector and currency exposure

A portfolio can look diversified by ticker while remaining concentrated by economic driver. Several large technology and communication-services companies may respond to the same AI spending cycle, interest-rate expectations or chip supply constraints.

Also check whether the ETF is currency hedged. Currency exposure is not the same as company concentration, but it can change a Canadian investor’s return in Canadian dollars. Read the fund objective and prospectus rather than guessing from the ticker.

Compare with your actual goal

The Canadian Investment Regulatory Organization says effective diversification considers asset class, geography and sector. It also warns that a specialized fund should not be the only fund in a portfolio.

Ask four practical questions:

Time horizon: when will you need the money?
Loss tolerance: could you stay with the plan through a large decline?
Other assets: do Canadian stocks, bonds, cash or non-U.S. markets already balance the exposure?
Rebalancing rule: what threshold would trigger a review, and how often will you check?

A narrow rally is a reason to inspect a portfolio, not a signal to make a rushed trade. Selling solely because some holdings have risen can create taxes, trading costs and a new concentration somewhere else.

A 15-minute review

Download the latest ETF Facts for each major Canadian-listed ETF.
Record the top 10 total, largest holding and largest sector.
List companies that appear across multiple funds or as direct shares.
Estimate indirect exposure using current portfolio weights.
Compare the result with your time horizon and asset-allocation plan.
Before trading, check fees, taxes and whether the change creates a different risk.

If the calculation or decision is uncomfortable, a registered adviser can help interpret the full portfolio. The important improvement is knowing what you own. A fund’s broad name should not be the only evidence of diversification.

Sources

Tags: S&P 500, ETFs, diversification, Canadian investors

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