Download the 05.29.26 Dynamic Portfolio Perspectives for advisors’ use with clients
By Tyler Corbett, Dynamic Asset Management
Most individual investors think they’re diversified, but it may not always be the case.
They may own a mix of stocks and bonds, and their portfolio may look balanced on paper. However, when you break it down, a different story emerges.
Many investors are heavily tilted toward U.S. equities without knowing it. Specifically, ownership is often concentrated in a relatively small group of well-known, mega-cap growth stocks, known as the “Magnificent 7,” that have driven most returns over the last few years. Those companies include: Nvidia (NVDA), Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META) and Tesla (TSLA).
As those companies grew with the artificial intelligence (AI) boom, so did their weight in portfolios. As of April 2026, the Magnificent 7 represented nearly 34% of the S&P 500’s total market capitalization, up from less than 13% in 2016. In 2025 alone, that same group drove approximately 42% of the index’s total return, that doesn’t leave much room for the other 493 stocks.
An investor who owns an S&P 500 index fund may be far more concentrated in these seven companies than they realize. To make things worse, investors have often made separate investments in some of these seven companies alongside their balanced portfolios, further exacerbating the issue.
Concurrently, “well diversified” portfolios have sneakily drifted toward:
- U.S. markets
- Large-cap growth companies
- Lower international allocations
As a result, what looks like a balanced portfolio is increasingly a concentrated bet on a single country, a single sector and a single investing style. If U.S. Mega-Cap growth experiences a meaningful correction, or simply a prolonged period of underperformance, investors who are unknowingly overexposed could see deeper drawdowns than their risk tolerance would suggest. The very thing they thought protected them — diversification — has quietly eroded.
What is diversification, really?
Diversification isn’t just about owning more assets; it’s about owning different catalysts (or avenues) of return. Global exposure adds different catalysts such as:
- Economic cycles
- Sector mixes
- Policy environments
- Currencies
Each of these catalysts moves on its own timeline. Economies grow at different rates and respond to different demand and demographic cycles. International indexes carry meaningfully different sector weights — financials, industrials, energy and materials all play a larger role overseas than they do in the heavily, tech-tilted U.S. market. Policy environments such as interest rates, fiscal spending and regulation vary by region and rarely move in lockstep. Currency movements can either amplify or offset the returns of foreign investments, adding another independent source of return.
True diversification means owning assets that respond to fundamentally different drivers — not simply owning more of what you already have. There’s a saying that if everything in your portfolio is moving up together, you’re not truly diversified — and you certainly don’t want everything moving together on the way down.
Why does looking beyond domestic borders matter?
It feels like international markets have lagged domestic in recent memory, so why consider them when the U.S. is “winning”? The answer is simple: because markets don’t move in one direction forever.
It may be a distant memory, but international markets beat the U.S. from 2002 to 2009 in seven out of eight years. And there were other strings of similar outperformance throughout history. Ultimately, it comes down to cyclicality within markets.
Looking at the current environment, compared to the U.S., international developed and emerging markets offer:
- Lower valuations for underlying companies
- Less concentration (broader sector exposure)
- Higher income potential (generally higher yields)
Trying to time rotations from domestic to international is often a losing battle. It’s optimal to ensure investors are positioned globally for when leadership changes occur to capture those diversification premiums.
What can you do for client portfolios?
Regular portfolio reviews are one of the most important, and most overlooked, advisor responsibilities. While there is no single industry standard, the most common practice is an in-depth review at least once a year, supplemented by quarterly or semi-annual check-ins during periods of market volatility. These touchpoints are how drift gets caught, allocations get rebalanced, and decisions about changing goals and risk tolerance actually happen.
Here are a few questions to ask every time you review portfolios:
- How much of the portfolio is truly international?
- Have the international vs. domestic allocations drifted over time?
- Does the portfolio rely too heavily on one market?
- Is the portfolio overweight a single sector, size or style (particularly Mega-Cap technology in today’s environment) relative to the client’s stated risk tolerance?
- When was the last formal rebalance and does the current asset mix still match the goals, risk tolerance and time horizon?
Global diversification isn’t about predicting which market is best or betting on the downfall of a specific market. It’s about being prepared for more than one outcome.
Recently, many portfolios seem to be designed for U.S. dominance. But let’s remember that in 2025, international markets almost doubled domestic markets with a return of over 33% vs. more than 17% respectively. Furthermore, in the first quarter 2026, international markets have maintained their rally, outperforming by more than 3%. Could this outperformance continue? No one can predict the future, but history is clear: When international markets pull ahead by margins like these, they tend to stay ahead for years.
It’s not always comfortable to allocate outside of home borders. But during times when the U.S. market lags, investors will be rewarded for their prudence. Global diversification isn’t about being defensive or bearish on the U.S. — it’s about being prepared.
Invest with intention.
Let’s talk about how we can support your clients’ portfolio success.
Contact Dynamic’s Asset Management team at (877) 257-3840, ext. 4 or assetmanagement@dynamicadvisorsolutions.com.
Tyler Corbett serves wealth advisors as a Portfolio Specialist on the Dynamic Asset Management team.
Disclosures
For advisor use only. This commentary is provided for informational and educational purposes only. The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. This is not intended to be used as a general guide to investing, or as a source of any specific recommendation, and it makes no implied or expressed recommendations concerning the manner in which clients’ accounts should or would be handled, as appropriate strategies depend on the client’s specific objectives.
This commentary is not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation. Investors should not assume that investments in any security, asset class, sector, market, or strategy discussed herein will be profitable and no representations are made that clients will be able to achieve a certain level of performance, or avoid loss.
All investments carry a certain risk and there is no assurance that an investment will provide positive performance over any period of time. Information obtained from third party resources are believed to be reliable but not guaranteed as to its accuracy or reliability. These materials do not purport to contain all the relevant information that investors may wish to consider in making investment decisions and is not intended to be a substitute for exercising independent judgment. Any statements regarding future events constitute only subjective views or beliefs, are not guarantees or projections of performance, should not be relied on, are subject to change due to a variety of factors, including fluctuating market conditions, and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond our control. Future results could differ materially and no assurance is given that these statements or assumptions are now or will prove to be accurate or complete in any way.
Past performance is not a guarantee or a reliable indicator of future results. Investing in the markets is subject to certain risks including market, interest rate, issuer, credit and inflation risk; investments may be worth more or less than the original cost when redeemed.
To the extent that this material concerns tax matters, it is not intended to be used by a taxpayer as tax advice. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
Investment advisory services are offered through Dynamic Advisor Solutions, LLC, dba Dynamic Wealth Advisors, an SEC registered investment advisor.
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