On June 23, the KOSPI fell 10% in a single session — one of the largest single-day drops in its history. Samsung Electronics and SK Hynix each fell 12%. The rest of the index, for the most part, held up. It didn’t matter. When two stocks account for 56% of total market capitalization, the other 800 don’t get a vote.
This is concentration risk in its clearest form: the danger that a portfolio’s apparent diversification is an illusion, because the underlying exposure is far narrower than it looks.
Concentration risk isn’t unique to national indices. It shows up in individual portfolios constantly. An investor might hold twenty different stocks, spread across multiple sectors, and still be running a concentrated bet — if most of those positions move together when the thing they share in common goes wrong. Owning five semiconductor companies isn’t diversification. Owning a broad ETF that’s 30% weighted toward three mega-cap tech names isn’t diversification either. The number of holdings is not the variable that matters.
The variable that matters is correlation — how likely your positions are to fall at the same time, for the same reason. True diversification means holding assets that respond to different economic forces: different industries, geographies, asset classes, time horizons. When one part of the portfolio is under pressure, another part should be either stable or moving in the opposite direction. If everything falls together, the diversification was cosmetic.
The KOSPI is an extreme case — few portfolios are as structurally lopsided as a national index with two companies controlling more than half its weight. But the underlying lesson scales down cleanly. Before asking whether you own enough stocks, ask whether your stocks can fall together. If the answer is yes, you haven’t diversified. You’ve just subdivided.
My take: Splitting one basket into sections isn’t diversification.
Not advice. Just how I see it.