Practical Takeaway on Diversification

Is your portfolio making a big bet on the Magnificent Seven? Mega-cap names like Nvidia, Alphabet, and Apple belong to the exclusive club that has largely driven US returns higher in recent years. Their success has led to market concentration. Portfolios tracking broad benchmarks have seen their diversification decrease and risk increase. How can you prepare your portfolio to absorb potential shocks? And where are the opportunities beyond the Mag Seven? Morningstar Holland’s Chief European Market Strategist Michael Field is one of the researchers who investigated this.

Beyond the Magnificent Seven: Unlocking Value in a Concentrated Stock Market

On this episode:

00:00:00 Welcome

00:01:49 The Magnificent Seven’s strong returns have benefited many investors. Why is their dominance a risk?

00:02:07 Your team highlighted a noteworthy stat in the report. The top 10 US stocks make up about 35% of the overall market. That’s almost double from a decade ago. What does that signal to you?

00:02:39 Can you explain what the hidden cost of market concentration is?

00:03:07 If the top stocks hold so much of the gains, where does that leave the rest of the market?

00:03:41 Let’s focus on key periods of market concentration. How does the current environment compare to the dot-com bubble?

00:04:11 And what about now versus the global financial crisis?

00:04:40 What if investors pulled back due to market concentration concerns in the last decade? Why would that have backfired?

00:05:51 How can investors manage the risk of market concentration in their portfolios?

00:05:50 Morningstar has identified investment opportunities for 2026. Why does the team favor US small caps over US large caps?

00:06:59 Another opportunity is the healthcare sector. What companies do Morningstar analysts think could fend off the competition for 10 years or more?

00:07:35 Morningstar encourages international diversification. Can you talk about the regions outside the US that look attractive for stock investors?

00:08:03 What’s the takeaway for diversifying beyond the Magnificent Seven in 2026?

Watch more from Morningstar:
9 Top ETFs for Income Investors That Stood Out in 2025

Where to Invest in 2026 After This Year’s Market Volatility

Why Betting Against Nvidia in the AI Arms Race Could Be a Mistake

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