Enter your top stock holdings and their market values to analyze your portfolio concentration. This tool calculates the percentage allocation and the Herfindahl-Hirschman Index (HHI) to determine your diversification health.
Analysis Result
Total Portfolio Value
$0.00
HHI Score (Concentration)
0
Asset
Weight (%)
Status
Why Diversification is the "Only Free Lunch" in Finance
In the world of investing, diversification is the practice of spreading your capital across various assets to reduce exposure to any single particular risk. By utilizing this Stock Portfolio Diversification Calculator, you can visualize exactly how much of your wealth is tied to specific companies or sectors.
Understanding the Herfindahl-Hirschman Index (HHI)
While most investors simply look at percentages, institutional managers use the HHI to measure concentration. In an investment context:
HHI Below 1,500: Well-diversified portfolio.
HHI 1,500 to 2,500: Moderately concentrated.
HHI Above 2,500: High concentration (Significant risk if one stock drops).
Real-World Example of Diversification
Imagine Investor A has $100,000 split equally among 20 stocks ($5,000 each). If one stock goes bankrupt, they lose only 5% of their portfolio. Investor B has $100,000 but puts $50,000 in one high-growth tech stock. If that stock drops 50%, Investor B loses 25% of their entire net worth instantly. This calculator helps you avoid Investor B's trap by identifying "over-weight" positions.
Key Diversification Strategies
The 5/10 Rule: Try not to let any single stock exceed 5% of your portfolio, and no single sector exceed 10-15%.
Correlation Check: Owning Apple, Microsoft, and Google feels like diversification, but since they are all Mega-cap Tech, they often move together.
Asset Class Mix: Mix stocks with bonds, real estate (REITs), or commodities to further lower the HHI of your total wealth.
Frequently Asked Questions
Q: Is it possible to be over-diversified? A: Yes. "Diworsification" occurs when you add so many assets that you can no longer track them, or you begin buying low-quality assets just to increase the number of holdings, which eventually leads to average market returns minus higher fees.
Q: How often should I rebalance? A: Most experts recommend checking your diversification levels quarterly or annually to ensure one winning stock hasn't grown to represent a dangerous percentage of your total value.
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div.innerHTML = '' +
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function calculateDiversification() {
var names = document.getElementsByClassName('stock-name');
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var totalValue = 0;
var data = [];
// Calculate Total
for (var i = 0; i 0) {
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data.push({
name: names[i].value || "Asset " + (i + 1),
val: val
});
}
}
if (totalValue <= 0) {
alert("Please enter valid market values for your assets.");
return;
}
var hhi = 0;
var tableBody = document.getElementById('breakdown-table');
tableBody.innerHTML = '';
for (var j = 0; j 15) {
status = "Highly Concentrated";
statusColor = "#e74c3c";
} else if (weight > 10) {
status = "Slightly High";
statusColor = "#f39c12";
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status = "Healthy";
statusColor = "#27ae60";
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var row = '
' +
'
' + data[j].name + '
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'
' + weight.toFixed(2) + '%
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'
' + status + '
' +
'
';
tableBody.innerHTML += row;
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// Display Summary
document.getElementById('res-total-value').innerText = '$' + totalValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('res-hhi').innerText = Math.round(hhi);
var warningBox = document.getElementById('risk-warning');
if (hhi < 1500) {
warningBox.innerText = "Excellent Diversification: Your portfolio is well-balanced across multiple assets.";
warningBox.style.backgroundColor = "#d4edda";
warningBox.style.color = "#155724";
} else if (hhi < 2500) {
warningBox.innerText = "Moderate Concentration: A few assets dominate your portfolio. Consider rebalancing.";
warningBox.style.backgroundColor = "#fff3cd";
warningBox.style.color = "#856404";
} else {
warningBox.innerText = "High Concentration Risk: Your portfolio is heavily reliant on a few assets. High risk of volatility.";
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warningBox.style.color = "#721c24";
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