Sector Exposure Calculator

Sector risk is the concentration people are least likely to have measured, because it is never reported anywhere they look. Each fund publishes its own sector breakdown, each one looks reasonable in isolation, and nothing adds them together. The result is a portfolio that can carry twice the intended weight in a single sector without anything ever flagging it. It usually happens the same way: a broad fund already holds a substantial position in whatever sector currently dominates the market, and then a second, more targeted fund is added on top of it. The broad fund's exposure does not disappear when the specialist fund arrives; the two stack. This page adds them up. Enter the sector allocation from each fund's factsheet, which is free and published monthly or quarterly by every managed fund and exchange traded fund, along with what you hold in each. It returns the combined sector weights across the whole portfolio in dollars and percentages, converts the spread into an effective number of sectors using a Herfindahl index so the concentration has a number attached to it, and prices the scenario that sector concentration actually exposes you to, which is one sector falling while the rest do nothing. Sector schemes differ between providers, running anywhere from eight to eleven categories, so group each factsheet's categories into the eight used here rather than leaving anything out. The result is approximate at the boundaries and accurate on the picture that matters.

Calculate.co.nz is proud to be partnered with Health Based Building, a leader in sustainable and health-conscious building innovation. With over a century of experience, they develop high-performance systems like Foreverbreathe Specification, Magnum Board, and Foreverbreathe Paints to support energy-efficient, non-toxic living environments. Their commitment to healthier homes aligns with our belief that informed choices lead to better outcomes for Kiwi households.

Nothing Adds Your Funds Together

Every fund publishes a sector breakdown and every one of them looks sensible on its own. The combined position is reported by nobody, which is how a portfolio ends up with twice the intended weight in one sector.

On the worked example the largest fund is 26.00% technology, which is unremarkable for a broad global fund. The portfolio is 39.14% technology, which is a different proposition entirely.

Worked Example: Three Funds, $35,000

Fund A holds $20,000.00 in a broad global allocation with 26% in technology.

Fund B holds $10,000.00 in a technology-focused fund at 85%.

Fund C holds $5,000.00 in a New Zealand fund weighted towards utilities and property.

Combined, technology is $13,700.00, or 39.14%. The top three sectors are 65.00% between them, and the eight sectors held behave like 4.65 equally sized ones.

The Stacking Effect

The mistake is not buying a sector fund. It is forgetting that the broad fund already holds that sector.

Adding $10,000.00 of a technology fund to a portfolio does not add $10,000.00 of technology exposure to a base of zero. It adds it on top of the $5,200.00 already there, which is why the combined figure jumps 13.14 percentage points above what the broad fund alone would give.

The same logic runs through every version of this. A regional fund stacks on the regional slice of a global fund; a small companies fund stacks on the small companies already in a total market fund. Our fund overlap calculator does this by market rather than by sector.

Eight Sectors, Behaving Like Fewer

Counting sectors is as unreliable as counting holdings. What matters is how evenly the money is spread across them.

The Herfindahl index squares every weight and adds them up, so a large position dominates and small ones fade to nothing, which is how concentration risk actually behaves. Inverting it gives a count you can reason about.

On the worked example eight sectors work out at 4.65 effective ones. Our index concentration calculator applies the same measure to individual holdings within a fund.

The Risk Sector Concentration Creates

A market-wide fall treats a concentrated portfolio and a spread one similarly. What separates them is one sector falling while the others do not, and that happens regularly without anything unusual in the wider market.

On the worked example a 30% fall in technology alone costs $4,110.00, or 11.74% of the whole portfolio. A 50% fall costs $6,850.00.

The table understates it, because it holds every other sector flat and sectors do correlate. A genuine sector fall usually drags related sectors with it, so treat those figures as a floor.

Sector And Country Are The Same Question Twice

A portfolio heavy in one country is usually heavy in that country's dominant sectors, and a portfolio heavy in one sector is usually concentrated where that sector is listed.

That is why running both measures is worth the effort. A position that looks moderate by country can look extreme by sector, and the reverse also happens, particularly for New Zealand investors whose domestic holdings are weighted towards utilities, property and a small number of large companies.

Our home bias calculator handles the country dimension.

What To Do About It

Decide whether it was intended. A deliberate sector position is a legitimate strategy. It only becomes a problem when nobody chose it, and this page exists to tell those two situations apart.

Redirect contributions rather than sell. The cheapest correction, with no trading cost on a sale side and nothing realised.

Do not add a fourth fund to fix it. That is generally how portfolios reach this state. Our one fund vs multi-fund calculator prices the alternative of consolidating instead.

Related NZ Portfolio Calculators

• Fund Overlap Calculator: the same exercise by market rather than sector.
• Index Concentration Calculator: concentration within a single fund.
• Home Bias Calculator: concentration by country.
• One Fund vs Multi-Fund Calculator: what consolidating would cost.
• Portfolio Rebalance Calculator: the amounts to move.