What the Magnificent Seven dominating the S&P means for investors
Investors who buy S&P 500 index funds sometimes worry about how top-heavy the index is -- a logical concern given that seven companies contribute more than a third of the S&P 500's value.
These companies make up such a large portion of the S&P 500 because of their outsized success in recent years. Anyone invested in the S&P 500 has shared in that success, so there are advantages to the Magnificent Seven's dominance.
However, the Magnificent Seven don’t come without risks, as we've seen in 2022 and some of 2025. The group is dominated by tech stocks and stocks that are more volatile than the S&P 500. They're more heavily impacted by bear markets and downturns in the tech sector, and either of those situations will likely drag down the performance of the S&P 500 compared to more equally weighted indexes.
Of course, it's also possible that the Magnificent Seven will continue their success and deliver outsized returns to investors. And even if some of them fall, other stocks in the S&P 500 will take their place.
S&P 500 index funds are still a simple, effective way to invest in stocks. If you'd like to diversify your portfolio more, you could opt for a different index fund, a combination of funds, or a self-managed portfolio of companies you select. As the success of the Magnificent Seven shows, it is possible to get market-beating returns by picking quality stocks.
