What is Sector Drift?
Sector Drift is the tendency of a portfolio's asset allocation to skew heavily towards a single industry (e.g., Technology) over time due to uneven growth, exposing the investor to concentrated risk.
The "Nvidia Problem"
You own an S&P 500 ETF, a Nasdaq ETF, and Apple stock. Congratulations, you are 60% exposed to one single crash. Most investors think they are diversified because they own 10 stocks. But if 8 of them are Tech, they aren't.
Why is Sector Drift dangerous?
When a single sector dominates your portfolio, you're not diversified—you're concentrated. A tech sector crash can wipe out 60% of your portfolio even if you "own the market" through ETFs.
Real-World Example: The Tech-Heavy Portfolio
A "diversified" portfolio with:
- 30% in S&P 500 ETF (heavily tech-weighted)
- 30% in Nasdaq ETF (pure tech)
- 20% in individual tech stocks (Apple, Microsoft, Nvidia)
- 20% in other sectors
Result: 60%+ exposure to Technology. One sector crash = portfolio crash.
Identify Sector Drift in Your Portfolio
The first step to fixing sector drift is seeing it. Our Sector Breakdown Pie Chart shows you exactly where your money is concentrated. Compare your "Naive Portfolio" (what you think you own) vs. your "Sovereign Portfolio" (what you actually own).
View Sector Breakdown →Key Takeaways
- Number of stocks ≠ diversification. 10 tech stocks is still concentration.
- ETFs can hide sector drift. S&P 500 and Nasdaq are both tech-heavy.
- Check your sector allocation regularly. Growth can create drift over time.
- Aim for balanced exposure. No single sector should exceed 30% of your portfolio.