Stock Market Glossary
Concentration risk
Excessive risk caused by strong exposure to few positions, regions or themes.
In brief: Excessive risk caused by strong exposure to few positions, regions or themes.
Meaning in practice
Concentration risk arises not only from one share, but also from similar companies, a single currency or correlated funds. It can remain hidden in calm markets and emerge when holdings fall together. Target weights and regular portfolio review help identify concentrations early.
Context for investors and traders
The term helps put market information into context. Its relevance depends on the instrument, investment horizon and current market situation, so it should be read with other data and a personal risk framework.
How to use this in practice
Use the term first to describe the situation and add verifiable data: time frame, benchmark, costs and liquidity. Only then does it become an assessment that can be connected to an investment objective and risk budget.
What to keep in mind
Avoid false precision. Many market terms describe probabilities or historical patterns; they neither guarantee a return nor replace the review of a specific security.
