Why your ASX portfolio is probably more concentrated than you think

Here's an uncomfortable truth about the Australian market: it's small and top-heavy. A handful of companies — the big banks and a few miners — make up an outsized share of the whole index. So a portfolio that looks varied on paper can quietly be one big bet on two or three forces.

How the concentration sneaks in

• You buy a broad Australian ETF — already heavy in banks and miners.
• You add CBA directly because it's a 'safe blue chip'.
• You hold a high-dividend fund — also stuffed with banks.
• You inherit some BHP. Now iron ore and the big four banks run a surprising amount of your week.

Why it matters

Concentration is fine while the wind is at your back. The danger shows up when one force turns — a bad bank result, a soft China print — and several of your holdings fall together because they were never really independent. The losses arrive in a bunch, not one at a time.

Diversification isn't how many things you own. It's how differently they behave when the news is bad.

The fix isn't to sell everything. It's to see your true exposures clearly, then decide whether you're comfortable with the bets you've accidentally made. You can't manage a concentration you can't see.

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