The S&P 500 has long been marketed as the ultimate in diversification. But today, the index is less broad than its name suggests. A staggering share of its value is concentrated in just ten companies, and all are riding the same AI-driven wave of inflated expectations.

For South African investors who own global Exchange Traded Funds (ETF) linked to the S&P 500, this creates a silent risk. What looks like 500 companies is, in reality, a bet on a handful of mega-cap tech firms. If AI optimism falters, those valuations could collapse and take portfolios down with them.

This concentration means the S&P 500 is behaving more like a high-risk sector fund than a diversified index. Investors who think they are spreading their risk may in fact be piling it onto one fragile theme.

The lesson is not to avoid global exposure but to be smarter about it. There are ETFs tracking broader global indices, emerging markets, or equal-weighted strategies that dilute this concentration. In the long run, they may protect savers from the volatility of a bubble.

Diversification only works if it is real. Right now, the S&P 500 is less a basket and more a balancing act on the shoulders of a few giants.