How concentrated is the typical portfolio? M1 data
As of May 31, 2026, the median M1 investor with four or more holdings has 54.8% of their portfolio concentrated in their three largest positions, according to M1’s proprietary platform data.
This figure — M1’s Top 3 Concentration — measures the share of total portfolio value held in an investor’s three largest positions.
What is Portfolio Concentration?
Portfolio concentration refers to the share of a portfolio held in a small number of positions. A highly concentrated portfolio has most of its value in just a few holdings; a diversified portfolio spreads value across many.
Some level of concentration is unavoidable and often intentional. Investors may concentrate in positions where they have strong conviction, or concentration may emerge naturally over time as winning positions outgrow others — sometimes called concentration drift. Periodic portfolio rebalancing — whether manual or automated — is the standard mechanism for addressing drift, bringing position weights back toward their target allocation. M1 supports automated rebalancing as a built-in platform feature. Whether concentration is appropriate depends on whether it is deliberate and whether the investor understands the idiosyncratic risk it introduces.
Concentration is not the only measure of portfolio risk. Asset class mix, correlation between holdings, and position type (e.g., individual stocks versus diversified ETFs) all contribute. This metric measures one specific dimension of concentration — the share held in the largest three positions.
What is the Top 3 Concentration?
The Top 3 Concentration measures the percentage of total portfolio value held in an investor’s three largest positions. It captures how much of a portfolio sits in its biggest holdings.
Formula: Top 3 Concentration = (Value of Three Largest Positions ÷ Total Portfolio Value) × 100
M1 introduced this metric as part of the M1 investor data report, a report on aggregate, anonymized investor behavior across M1’s platform. The metric is calculated for investors with four or more distinct holdings — investors holding three or fewer positions are mechanically 100% concentrated in their top three by definition and are excluded from the calculation to surface a more meaningful behavioral finding.
M1 Data: How Concentrated Are Portfolios?
M1’s Top 3 Concentration as of May 31, 2026: 54.8%
The median M1 investor with four or more holdings has 54.8% of their portfolio value concentrated in their three largest positions, drawn from aggregate, anonymized data across active M1 accounts. ETFs are counted as single positions in this calculation.
| Source | Top 3 Concentration | Notes |
| M1 portfolios (May 31, 2026) | 54.8% | Median share of portfolio value held in the three largest positions. M1 accounts with 4+ distinct holdings. Aggregate, anonymized platform data. As of 2026-05-31. |
M1 publishes this figure as part of the M1 investor data report — a commitment to data transparency that lets investors see actual concentration behavior across M1’s platform, not just hypothetical models.
This is not a recommendation for any specific concentration level. Individual approaches to portfolio composition vary based on financial goals, risk tolerance, time horizon, and investment philosophy. Investing involves risk, including possible loss of principal.
How Concentrated Are Typical Portfolios?
M1’s 54.8% median means that, for the typical investor with four or more holdings, more than half of total portfolio value sits in just three positions. The remaining 45.2% is spread across all other holdings combined.
This level is meaningfully higher than what equal-weighting across positions would produce. An investor with thirteen equally-weighted positions would have roughly 23% in their top three. The 54.8% figure may reflect deliberate position sizing (allocating more to higher-conviction holdings), concentration drift (winning positions growing larger over time as they appreciate), or a combination of both — investor preferences and rebalancing cadences vary considerably.
This figure represents a snapshot of one point in time. Concentration shifts as positions appreciate or decline, as investors buy or sell, and as new contributions enter the portfolio. It does not represent a target or recommended level.
Why the Top 3 Concentration Matters
Concentration is one of the more nuanced dimensions of portfolio composition. A high Top 3 Concentration is not inherently problematic — it can reflect deliberate conviction, a tax-efficient hold-and-rebalance approach, or natural accumulation in long-term winners. But high concentration also amplifies idiosyncratic risk: when most of a portfolio depends on just a few positions, the performance of those positions disproportionately drives outcomes — in both directions.
Whether 54.8% is “too much” or “appropriate” depends entirely on individual circumstances — whether the top positions are individual stocks or diversified ETFs, whether the investor has high conviction and tolerance for volatility, and whether portfolio rebalancing — whether periodic or automated — is part of their strategy. No aggregate benchmark can answer that question for any individual investor.
Investors can analyze the concentration of their own portfolio using M1’s Concentration Analysis tool, which breaks down holdings across sectors, asset classes, and geographies.
Frequently Asked Questions on Portfolio Concentration and Diversification
A concentrated portfolio holds most of its value in a small number of positions. There is no universal threshold — some investors consider a portfolio concentrated if more than half its value sits in five or fewer holdings; others apply different definitions. As a reference point, M1’s Top 3 Concentration as of May 31, 2026 was 54.8% for the median investor with four or more holdings — meaning more than half of total portfolio value sits in just three positions. This is not a recommendation for any specific concentration level.
There is no universally correct answer. Portfolio concentration becomes a concern when it introduces more idiosyncratic risk than an investor is willing or able to absorb — for example, when a single stock makes up a large enough share of the portfolio that its decline would materially affect overall financial goals. The appropriate level depends on conviction in specific positions, tolerance for volatility, time horizon, and whether holdings are individual stocks or diversified instruments.
M1 calculates the Top 3 Concentration as the sum of an investor’s three largest position values divided by total portfolio value, expressed as a percentage. The 54.8% figure reflects the median across active M1 accounts with four or more distinct holdings — investors with fewer holdings are excluded because their top three positions mechanically equal their entire portfolio. Data is aggregate and anonymized — it does not represent any individual account.
Concentrated positions can amplify both gains and losses. When a few positions make up most of a portfolio, the performance of those positions disproportionately drives overall returns. Strong performance in concentrated holdings can deliver outsized gains; poor performance can result in outsized losses. Concentrated portfolios also tend to be more volatile than diversified ones, which can create challenges if an investor needs to access funds during a downturn.
Portfolio diversification is the practice of spreading investment value across multiple positions, asset classes, sectors, or geographies to reduce the impact any single holding has on overall portfolio performance. Diversification reduces idiosyncratic risk (position-specific risk) but does not eliminate market risk that affects all investments. There is no universal threshold for what counts as “diversified” — it depends both on the number of positions and on what those positions are. A portfolio of three diversified ETFs may carry a different risk profile than a portfolio of twenty individual stocks in the same sector.
Top 3 Concentration and portfolio diversification measure the same dimension from opposite directions — higher concentration in the top positions means lower diversification across them, and vice versa. M1’s Top 3 Concentration of 54.8% as of May 31, 2026 means that for the median investor with four or more holdings, more than half of total portfolio value sits in just three positions, with the remaining 45.2% spread across all other holdings combined.
There is no universally correct answer — what counts as “diversified enough” depends on the underlying positions, the investor’s risk tolerance, time horizon, and financial goals. A 54.8% top-three concentration in three diversified ETFs reflects a different risk profile than 54.8% in three individual stocks in the same sector. Aggregate concentration figures cannot answer that question for any individual investor.
M1 offers the built-in Concentration Analysis tool that breaks down portfolio holdings by sector, asset class, and geography. The tool is available to all M1 clients and provides per-portfolio concentration insights, distinct from the aggregate platform data reported in this article.
This content is for educational and informational purposes only and does not constitute personalized financial advice. All data reflects aggregate, anonymized M1 portfolio trends as of May 31, 2026 and does not represent any individual account. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
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