Concentration risk has tended to be predominantly confined to the Australian market but as investors diversify overseas, they face a similar problem in the United States.
A unique feature of the Australian sharemarket is the dominance of the financials and materials industries. When looking at the ASX 200 sector weights, banks and miners account for more than 50 per cent of the market.
This significant concentration risk has tended to be predominantly confined to the Australian market but as investors diversify overseas, there is now a similar risk growing in the US with the emergence of the magnificent seven.
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Ben Smythe is a partner and principal adviser of Minchin Moore Private Wealth.
