Portfolio Concentration Lab.
Explore how unequal holding weights can concentrate a hypothetical portfolio. Compare the largest positions, calculate a concentration index, and learn why owning several funds does not automatically eliminate overlapping exposure.
How concentrated is this example?
Enter five hypothetical positions that add up to 100%. The calculator illustrates mathematical weight concentration, not a portfolio’s overall risk, suitability, correlation, or probable return.
What does the concentration index measure?
Herfindahl–Hirschman index
The model adds the squares of five fractional position weights (for example 40% becomes 0.40). A single position at 100% has an index of 1.00; five equal 20% positions have an index of 0.20. This is a descriptive measure of how uneven the five weights are.
Effective number of positions
The reciprocal of the concentration index, 1 / HHI, answers: “How many equally weighted positions would give the same weight-concentration index?” It does not measure independent economic exposures, expected losses, or diversification quality.
Why five ETFs can still overlap
Each ETF may hold the same companies, sectors or securities. A five-line-item model does not see through the funds. Review their actual holdings to detect duplicated issuer exposure and concentration hidden inside fund wrappers.
What this tool cannot calculate
It does not calculate volatility, correlations, leverage, taxes, liquidity, fund look-through weights, changing market values, stress-test losses or personal risk tolerance. More positions or a lower HHI do not guarantee protection from losses.
Try these two examples.
Example 1: Equal weights
Enter 20, 20, 20, 20 and 20. Compare the concentration index and effective number of positions with the default example.
Example 2: One dominant holding
Enter 80, 5, 5, 5 and 5. Observe how a large single weight changes the math even though the number of positions remains five.
Primary-source investor education
The SEC emphasizes diversification both across and within asset categories and warns that narrowly focused funds may not provide broad diversification. FINRA recommends examining actual mutual-fund and ETF holdings to identify overlapping exposures.
Don’t just count funds. Inspect what they own.
Use the ETF Research Worksheet and learn to examine concentration, overlapping holdings and fees in the free ETF Research Lab.
Educational demonstration only. The five positions and inputs are hypothetical and are not stored, transmitted or connected to a brokerage. HHI is only a measure of weight concentration, not an investment-risk score or advice. Actual investments can lose money. Read our disclosures.