Six Things Most Investors Should Be Doing Now — But Aren't

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What I’m about to say likely won’t be new to most investors. Yet despite growing awareness of several key risks in today’s market, many portfolios remain positioned as if those risks don’t exist. That’s why the message is worth repeating.

The U.S. equity market has become one of the most concentrated in modern history — and many investor portfolios reflect that reality.

As a wealth advisor, I regularly review individual investor portfolios, which provides a useful window into investor sentiment. When markets become skewed, bullish or bearish, the evidence tends to show up clearly in how portfolios are positioned.

Despite frequent warnings about market concentration, I continue to see the same pattern among investors who hold individual stocks: heavy exposure to U.S. mega-cap equities, particularly technology and tech-adjacent growth companies.

To be clear, this positioning has worked extremely well.

But history shows that periods of extreme market leadership rarely persist indefinitely. Leadership rotates, valuations reset, and the areas of the market that benefited most during the prior cycle often face the greatest pressure during the next one.

With that in mind, here are several portfolio adjustments investors should be seriously considering.

1. Reduce Mega-Cap Concentration Risk

The U.S. equity market is currently more concentrated than at almost any point in modern history.

The top 10 companies in the S&P 500 now represent more than 30% of the index.
The top seven stocks have driven a disproportionate share of index returns over the past two years.

Markets have experienced similar dynamics before. The late-1960s Nifty Fifty era and the 1999–2000 technology bubble both featured narrowing leadership and extreme concentration. In both periods, the prior leaders eventually endured long stretches of underperformance.

Valuation dispersion across the market also remains elevated:

Forward P/E ratios for the largest growth stocks remain significantly higher than the median S&P 500 company.
Mid-cap and small-cap equities currently trade at meaningful discounts relative to large-cap growth stocks.

International equities remain cheaper as well, with developed and emerging markets trading at lower relative valuations compared with the U.S.

Mean reversion is not a timing tool — but it is a powerful force over longer horizons.

Broadening exposure across market capitalizations and geographies can reduce concentration risk without abandoning equity exposure altogether.

2. Don’t 'Set It and Forget It' With Individual Stocks

Investors who hold individual companies should remember that competitive advantages rarely last forever.

Several long-term studies illustrate how quickly corporate leadership changes:

The average tenure of an S&P 500 company has declined from 33 years in 1965 to roughly 15 years today.
At the current pace, approximately half of the companies in today’s S&P 500 could be replaced within the next decade.
Only around 10% of the original companies from the S&P 500’s 1957 launch remain in the index today.

These statistics highlight an important reality: most companies eventually lose their competitive edge.

For investors who own individual stocks, periodic review and reassessment are essential. Assuming today’s market leaders will dominate indefinitely is rarely a reliable long-term strategy.

3. Don’t Overreach for Yield

In today’s environment, many investors are extending further along the risk curve in search of income.

But not all yield is created equal.

Credit spreads remain relatively tight compared with historical stress periods, suggesting investors may not be receiving sufficient compensation for incremental credit risk.

At the same time, there are signs of potential stress beneath the surface:

Default rates in parts of the private credit market have begun rising from cycle lows.
Non-bank lending has expanded rapidly in recent years.
Covenant quality in leveraged lending remains weaker than historical norms.

History shows that credit risk tends to reprice quickly when liquidity tightens.

Yield alone is not a strategy. Compensation for risk is.

4. Add True Diversifiers

During market drawdowns, correlations between traditional assets often rise, reducing the effectiveness of standard stock-and-bond diversification.

This is where true diversifiers can play an important role.

Strategies such as managed futures and trend-following have historically demonstrated low or even negative correlations to equities during major market stress.

For example, the SG Trend Index generated positive returns during both 2008 and 2022, years when equities experienced significant declines.

Academic research has also shown that trend-following strategies can perform particularly well during sustained market trends, including periods of equity market stress.

Alternative strategies are not replacements for equities. But they can serve as valuable risk-management tools.

Even modest allocations can help improve the overall volatility profile of a portfolio during difficult market environments.

5. Invest Less in 'Story' Stocks and More in Quality Businesses

Quality and valuation matters over the long term.

Over long horizons, the highest-valuation segments of the market often underperform when growth expectations fail to materialize.

Companies with the following characteristics have historically delivered more durable results:

High returns on invested capital and direct profitability
Durable competitive advantages
Strong free cash flow generation
Reasonable valuations

These types of businesses tend to compound capital more reliably over time.

Bear markets typically impact the areas of the market where expectations and valuations have become most detached from underlying fundamentals.

Liquidity also becomes more valuable during periods of market stress. Investors should be cautious about committing excessive capital to illiquid private investments late in the cycle.

6. Avoid Excessive Cash Allocations

Another pattern I frequently observe is investors holding significantly more cash than their long-term asset allocation requires.

A prudent cash reserve is important. However, excessive cash positions can quietly erode long-term purchasing power.

After accounting for taxes and inflation, cash rarely preserves real wealth over time.

Investors should determine an appropriate reserve based on their individual circumstances. The remainder of the portfolio should be allocated across diversified assets designed to grow over the long term.

Allowing short-term market concerns to drive large structural cash allocations can significantly reduce long-term portfolio returns.

The Bigger Picture

Today’s market environment includes several notable dynamics:

Elevated geopolitical risk
Significant valuation dispersion
Tight credit spreads
Historically high index concentration

There will be another bear market, but history tells us two things with reasonable certainty:

No one really knows when…

The worst-hit stocks will have rich valuations and lower-quality businesses

Periods of extreme concentration and complacency rarely resolve quietly.

For investors seeking to build resilient portfolios, positioning before those shifts occur is far more effective than reacting after the fact. In fact, we are seeing some of these adjustments now in private credit and SaaS stocks.

I’m Curious What You’re Seeing

Which one do you think is the biggest risk in investor portfolios today?

A) Too much concentration in mega-cap tech stocks
B) Investors reaching for yield in credit markets
C) Lack of true diversification beyond stocks and bonds

Or is there another risk you’re seeing that deserves more attention?

I’d be interested to hear your observations in the comments.

@louisllanes