The Concentration Audit: find out what you actually own in about 40 minutes

Most people can tell you how many funds they own. Almost nobody can tell you how much of their money sits in their single largest company. Those are different questions, and only the second one matters when something breaks.

The gap exists because diversification is sold at the wrong level. You buy four funds, so it feels like four decisions. But an S&P 500 fund, a total-market fund, a Nasdaq-100 fund and a large-cap growth fund are not four decisions. They are one decision, priced four ways, with the same handful of companies at the top of each. Roughly 40% of the S&P 500's weight sits in ten names. Nvidia alone is about 8% of that index and around 14% of the Nasdaq-100. Stack those funds and the overlap compounds rather than cancels.

This playbook is a measurement exercise, not a recommendation. At the end you will have one number: the percentage of your investable money that depends on a single company. What you do about that number is your call, and a genuinely good use of an hour with a licensed advisor. But you cannot make the decision without the number, and the number takes about forty minutes to produce.

Step 1 — Build the inventory (10 minutes)

Open a blank spreadsheet. One row per holding, across every account you control. Do not skip accounts because they are small or because you never look at them; the forgotten old 401(k) is frequently the most concentrated thing you own.

Columns:

• Account — taxable brokerage, Roth IRA, traditional IRA, 401(k), HSA, employer stock plan, crypto exchange, anything with a balance.
• Holding — fund ticker or company name.
• Value — current dollar value. Round to the nearest hundred; precision is not the point.
• Type — index fund, active fund, single stock, cash, bond, other.

Sum the value column. That total is your denominator for everything that follows. Call it T.

Step 2 — Get the look-through weights (15 minutes)

For every fund, you need its top ten holdings and their percentage weights. Every fund provider publishes this on the fund's own page, usually labelled “Top Holdings” or in the monthly fact sheet. Copy the top ten and their weights into a second sheet, one block per fund.

Two rules that keep this honest:

• Use the provider's page, not a screenshot from a forum. Weights move constantly and third-party copies go stale.
• Note the “as of” date. If a fund's holdings are three months old, treat the output as approximate. It will still be far better than the guess you are currently running on.

For single stocks, the weight is 100%. For bond funds and cash, skip — they contribute nothing to single-name equity exposure. For target-date funds, dig one level deeper: they hold other funds, and you need the underlying ones.

Step 3 — Multiply and total (10 minutes)

For each fund, for each of its top ten holdings:

Exposure to company X via fund F = (dollars in F) × (X's weight in F)

Then sum each company's exposure across every fund and every account, and divide by T.

A worked example. Suppose you have $400,000 total, split like this — and suppose, purely for illustration, the published weights are as shown. Check your own funds' actual current figures; these numbers move week to week.

• $180,000 in an S&P 500 index fund, with your largest holding at 8% → $14,400
• $90,000 in a total-market fund, same company at roughly 7% → $6,300
• $70,000 in a Nasdaq-100 fund, same company at roughly 14% → $9,800
• $40,000 in a large-cap growth fund, same company at roughly 12% → $4,800
• $20,000 in that company's shares directly, from an old grant → $20,000

Total exposure: $55,300 on $400,000, or 13.8%.

The person in this example believes they hold four diversified funds plus a small legacy position. They actually have nearly one dollar in seven riding on a single company's earnings. Nothing here is wrong or reckless. It is simply not what they think they own.

Repeat the exercise for your top five companies. Then sum those five. That second number — top-five share of total — is the one that tells you how correlated your “diversified” portfolio really is, because the top five in most large-cap funds are the same five companies in the same industry facing the same shocks.

Step 4 — Add the exposures that are not in the spreadsheet

This is where most audits stop too early, and it is where the real risk usually lives. Add rows for:

• Employer stock. Vested RSUs, ESPP shares, exercised options, and company stock inside your 401(k). Count vested holdings at market value.
• Unvested equity. Not an asset yet, but list it separately — it tells you how much future compensation depends on the same ticker.
• Your salary. If you work for a public company, or a private one in a single sector, your income is correlated with that sector. A layoff and a drawdown tend to arrive in the same quarter, for the same reason.
• Crypto. Holdings across exchanges and wallets, counted as one bloc rather than several coins — they move together far more than the marketing suggests.
• Property. If your home's value depends on one local employer or one industry, that is another line in the same bet.

An engineer at a large tech company can easily discover that salary, RSUs, 401(k), brokerage and home value all point at the same three-sentence thesis about enterprise software demand. That is a fine thesis. It is a bad accident.

Step 5 — Set the threshold after the data, before the decision

Write down, in a sentence, what number would make you uncomfortable — and why. Not a number you read somewhere. Your number, tied to a consequence.

Useful phrasing: “If my largest single-name exposure fell 50% overnight, I would lose $______, which would delay ______ by ______ months.”

That sentence converts a percentage into a life event, which is the only form in which most people can actually judge it. A 25% position is abstract. “Two extra years of working” is not.

If the number is higher than you want

The mechanics, not the recommendation — what you choose is yours, and anything involving meaningful tax consequences deserves a professional:

• Redirect before you rearrange. New contributions can go somewhere else without triggering a single taxable event. For many people this alone fixes the drift within a couple of years.
• Use the tax-sheltered accounts first. Rebalancing inside an IRA or 401(k) has no immediate tax cost. Rebalancing in a taxable account does. Do the free version before the expensive one.
• Know your lots. In taxable accounts, specific-lot identification lets you choose which shares to sell. Default settings often pick for you, badly.
• Mind the plan rules. Employer stock plans have blackout windows, holding periods and trading policies. Check them before you plan anything.
• Decide on a schedule, not a feeling. If you do act, a pre-committed calendar removes the temptation to time it, which is where most of these plans die.

Failure modes

• Counting funds instead of companies. The entire reason the audit exists. Four tickers is not four bets.
• Ignoring the 401(k) because you cannot easily trade it. Illiquid exposure is still exposure. It belongs in the denominator and the numerator.
• Excluding employer stock as “different.” It is the same risk with better vesting paperwork.
• Doing the audit after a drawdown. The number you calculate in a panic is the one you will act on emotionally. Do it on a quiet Sunday.
• Chasing precision. Weights change daily. If you are arguing about the second decimal place you have missed the point — you are looking for the difference between 6% and 16%, not 13.8% and 14.1%.
• Confusing this with a forecast. The audit tells you what happens if a company falls. It has nothing to say about whether it will.
• Fixing it once. Weights drift upward on their own when a stock outperforms. That is the mechanism that created the problem in the first place.

The re-run schedule

Twice a year is enough, and the calendar dates matter less than the triggers. Re-run the audit when any of these happen: an equity grant vests, you change employer, you add a new fund, one holding rises more than 40% in a year, or you are about to make a decision that depends on the portfolio — a house, a sabbatical, a retirement date.

Keep the spreadsheet. The second run takes ten minutes because the structure already exists, and the comparison between runs is more informative than either number alone. Drift is the thing you are watching for.

The one-line version

Add up every dollar that depends on your single biggest company, divide by everything you own, and look at the answer before the market makes you look at it. If you want the surrounding structure — where the accounts sit and what feeds what — the Money OS covers the plumbing, and the fee autopsy covers what the whole thing costs to run.

This is a framework for measuring your own exposure. It is not investment advice, and The Sharp Brief is not an investment adviser. Decisions about your holdings — especially any with tax consequences — are worth discussing with a licensed professional.