The index most investors rely on as a proxy for broad market exposure has shifted significantly. Here's what's changed and what it means for portfolio construction.
For most investors, the S&P 500 Index is a shorthand for diversification — broad, balanced, market exposure. That assumption has grown harder to defend.
The index has changed, and many portfolios have changed with it.
According to S&P Global, the S&P 500 was 38% information technology as of June 30, 2026.1 The Russell 1000 Growth Index, often held alongside the S&P 500 as a complement, was even more concentrated, with 53% in the same sector as of July 1, 2026.2
That's not a diversified portfolio. That's a concentrated technology bet sitting inside an index most investors still think of as a core, balanced holding.
"Core investing is a drifting target," says Mike Honkamp, Portfolio Manager at Dana. "And the S&P 500 is a good example of that."
The shift has been gradual enough to miss and significant enough to matter. Not long ago, General Electric was among the largest holdings in the S&P 500.3 At this writing, that position belongs to NVIDIA, followed by Apple, Microsoft, Amazon, and Alphabet — companies whose market values are tied almost entirely to technology and digital infrastructure.4
As AI, data center buildouts, and digitization have driven valuations of the largest technology companies higher, their index weights have followed. The S&P 500 is a market-cap-weighted index, so when a handful of companies grow to represent a disproportionate share of total market value, the index moves with them. Some longtime observers of the S&P 500 now describe it as a growth index, given its current constituency. The data makes the case.
The concentration risk in the S&P 500 compounds when investors also hold growth-oriented funds alongside it.
Consider a portfolio that pairs an S&P 500 index fund with a Russell 1000 Growth fund. The investor may believe they have broad U.S. equity exposure with a growth tilt. What they may actually have is two large, overlapping bets on the same sector and possibly even the same names. With the S&P 500 at 38% IT and the Russell 1000 Growth at 53% IT, the combined technology exposure could be meaningfully higher than the investor realizes.
"When investors evaluate securities, funds, or ETFs for inclusion in a portfolio, oftentimes they focus on performance and the name of the fund, and they don't necessarily understand how much overlap there might be," noted Mike.
That overlap is easier to ignore when both funds are performing well. It is more visible during sector drawdowns, when both funds move in the same direction at the same time.
The flip side of technology's growing weight in the S&P 500 is the shrinking weight of everything else. For example, in both the S&P 500 and the Russell 1000 Growth, industrials currently make up approximately 9% of the index.5
Sectors tied to domestic manufacturing, infrastructure, and physical production have been crowded out by market cap dynamics. A portfolio that mirrors the S&P 500 today is more exposed to a narrow slice of the economy than it may have been five or 10 years ago, often without the investor knowing it.
A passive S&P 500 index fund is designed to match the index — nothing more. An actively managed core equity strategy uses the S&P 500 as a benchmark but applies an active and disciplined investment process aimed at generating better risk-adjusted returns over full market cycles. The objective of an actively managed core equity strategy isn't to take large active bets away from the index. It's to make the right decisions within it, consistently, over time.
At Dana, that process starts before a single stock is selected. Sector neutrality, equal-weighted positions within sectors, and periodic rebalancing within portfolios — the structural risk controls we’ve built into our equity strategies — are designed to keep portfolios from drifting with the index.
Sector neutrality means maintaining equal exposure across all 11 GICS sectors, regardless of what market-cap dynamics are doing to the index. If energy represents 4% of the S&P 500 and energy stocks rotate sharply higher, a sector-neutral portfolio participates. One that drifted away from energy to follow momentum does not.
"This protects us against violent sector rotations that happen from time to time," noted Portfolio Manager Sean McLeod. "Instead of trying to predict interest rates or oil prices — things that are inherently difficult to predict — we are focused on buying the best stocks in each sector."
Equal weighting sets the starting point, but it's quarterly rebalancing that keeps it in place. Each quarter, Dana reviews position sizes against sector-neutral targets. Where a name has run up enough to pull meaningfully away from its target weight, the position is trimmed. Where a name has lagged, the position is added to. That discipline is what keeps a winning stock from quietly turning into an oversized bet, and what keeps a struggling sector from being abandoned right before it recovers.
"Too few names, volatility goes up. Too many names, it's basically de-worsification," Sean explained. "You look like the index, you act like the index. You can't really separate yourself from the index."
The S&P 500 is a well-constructed index, but it has shifted. A portfolio that reflected genuine sector diversification a decade ago may look quite different today because of how market cap dynamics have reshaped what's underneath it.
Understanding what you own is the starting point. A disciplined core equity approach is one way to make sure the composition of the benchmark doesn't quietly become the composition of the portfolio.
Why is today's S&P 500 Index considered more concentrated?
The S&P 500 is a market-cap-weighted index, meaning larger companies carry more weight. Over the past decade, technology companies have grown dramatically in market value, driven by earnings growth in AI, cloud computing, semiconductors, and digital advertising. As those companies grew, their index weights grew with them, and the S&P 500's composition shifted accordingly. Today, a single sector accounts for more than a third of the index's total weight.
What is sector concentration risk in equity investing?
Sector concentration risk is the exposure an investor carries when a portfolio holds a disproportionate amount of a single sector. It increases the impact that sector-specific events — a regulatory shift, an earnings miss across major names, a sharp rotation out of growth — have on overall performance. Investors who hold multiple funds may still be concentrated if those funds share significant sector overlap.
How does sector neutrality protect against benchmark drift?
A sector-neutral approach maintains portfolio weights in each sector, regardless of how market-cap dynamics shift the index over time. Dana maintains this through quarterly rebalancing: reviewing position sizes against sector-neutral targets and trimming names that have run up or adding to names that have lagged. This prevents a portfolio from inadvertently concentrating in any single sector because those sectors have appreciated faster than the rest of the market. It also keeps the portfolio positioned to participate in sectors that fall out of favor temporarily and in the rotations that follow when those sectors recover.
How does an actively managed core equity strategy differ from owning the S&P 500?
A passive S&P 500 index fund is designed to match the index. An actively managed core equity strategy uses the S&P 500 as a benchmark, but applies a disciplined investment process — sector neutrality, equal weighting, active stock selection within each sector, and fewer holdings — with the goal of generating better risk-adjusted returns over full market cycles.
1 S&P Global, June 30, 2026
2 iShares. “iShares Russell 1000 Growth ETF (IWF) – Sector Weightings.” BlackRock / iShares
3 Sam Mattera, “General Electric Used to Be Bigger Than Apple — What Happened?” The Motley Fool,
April 19, 2015
4 S&P Global, June 30, 2026 5 S&P Global, June 30, 2026, iShares. “iShares Russell 1000 Growth ETF (IWF) – Sector Weightings.” BlackRock / iShares