It’s hard to avoid the daily market headlines touting huge moves for AI firms, or the latest volatility from the Strait of Hormuz. However, events-based news often obfuscates the subtler stories that can really define a portfolio’s performance. This year, concentration risk is shaping up to be one of the defining stories — and there’s no time like the present to address it.
Key Takeaways:
- Concentration risk is high, with the top 10 of the S&P 500 making up just under 40% of that index.
- QINT provides ex-U.S. quality stock exposure, which helps investors to diversify away from U.S. concentration risk.
- The ETF has outperformed its category average over the past year with a 22.7% gain, making it a compelling option.
How significant is concentration risk right now? Recent analysis suggests that the top 10 holdings comprise just under 40% of the S&P 500 right now. That marks a notable increase from 26% in spring 2023. Should those top names begin to teeter, or worse, actively sell off, heavily concentrated portfolios would feel the impact acutely.
Where, and how, then, should investors diversify? Rather than continue to add U.S. equities exposure, it may be worth considering international equities. The American Century Quality Diversified International ETF (QINT) holds a special place in that realm, combining international equities with a quality screen.
Charging 34 basis points, QINT tracks the American Century Quality Diversified International Equity Index. In doing so, it targets large and midcap stocks outside the U.S.
The index emphasizes a few important metrics like strong financials, growth prospects, and attractive fundamentals. Depending on market conditions, too, the quality international equities fund shifts between value and growth. So how has it performed?
See more: American Century’s Testani on How to Beat Concentration Risk
QINT has returned 22.7% over the past 12 months, according to ETF Database data. That return allowed the fund to outperform its ETF Database Foreign Large Cap Equities category average over the same period.
What’s more, per YCharts data, the fund’s price is close to rising past its 50 and 200-day Simple Moving Averages (SMAs), a classic buy signal. Taken together, these factors combined make QINT an appealing option to balance portfolios against rising U.S. market concentration.
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VettaFi LLC (“VettaFi”) is the index provider for QINT, for which it receives an index licensing fee. However, QINT is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of QINT.
