**The Hidden Dangers of Market-Cap Weighting**
For some time now, I’ve been sounding the alarm about the risks associated with concentration in large-cap indices. The way these indices are constructed, with their market-cap weighting, has led to a market that is dominated by a handful of behemoths. This, in turn, has resulted in supposedly diversified portfolios carrying far more company-specific risk than many investors realize.
By company-specific risk, I’m referring to the unique challenges and uncertainties facing individual companies. When a small group of companies accounts for a disproportionate share of the market’s value, even a well-diversified portfolio can be heavily exposed to the fortunes of these individual companies.
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**A Note on Disclosure**
I, the author, do not have any positions in the companies mentioned in this article, nor do I plan to initiate any such positions within the next 72 hours. This article represents my own opinions and views, and I am not receiving compensation for it. I have no business relationship with any company mentioned in this article. The Lead-Lag Report is provided by Lead-Lag Publishing, LLC, and all opinions and views expressed are subject to change at any time.
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