What is portfolio concentration risk?
Concentration risk is how exposed your portfolio is to a single position or a single sector. When one stock is a large share of your portfolio, its daily move dominates your total — a bad week for that one company becomes a bad week for you, no matter what the rest of the market does. The same applies at the sector level: holdings in the same sector tend to move together, so five technology stocks can behave more like one big position than five independent ones.
Concentration is not automatically bad — concentrated portfolios simply amplify both outcomes. The point of measuring it is to make sure the amount of concentration you have is the amount you actually chose.
How the math works
This checker computes three things from the values you enter, and nothing else:
- Top-position weight— your largest holding's value divided by your total portfolio value.
- Top-sector weight— the share of your portfolio in your most-represented sector, using each ticker's sector classification.
- Effective number of positions— computed from the Herfindahl–Hirschman index (the sum of each position's squared weight). Its reciprocal tells you how many equally-weighted positions your portfolio behaves like. Ten holdings where one stock is 60% of the total behave like far fewer than ten independent positions.
Everything is computed locally in your browser from the numbers you type in. Nothing is uploaded, stored, or shared.
What to do with the result
There is no universally "correct" concentration level — it depends on your conviction, time horizon, and tolerance for drawdowns. The useful questions are: does your biggest position deserve its weight? Would a rough week in your top sector change your plans? If yes, you may be more concentrated than you intended. If you can answer "yes, and I chose this deliberately," concentration is a decision, not an accident.
A practical habit: re-check after big market moves. Winners grow into oversized positions quietly — concentration drifts up on its own.