The greatest risk in your portfolio may be the investment that has made you the most money. When investors think about portfolio risk, they usually think about poor investment decisions — buying the wrong company or watching an investment decline in value. However, in my work with clients and financial advisers, some of the most challenging — and most important — portfolio decisions arise from exactly the opposite: exceptional investment success. Over time, a single share can quietly transform a well-diversified portfolio into one heavily dependent on a single company. This is mostly not the result of a deliberate decision to concentrate a portfolio. It is simply what happens when one exceptional business consistently outperforms everything else. South African investors have seen this many times. Naspers, Richemont and Capitec have all delivered extraordinary long-term returns. What once represented a modest allocation can gradually become the dominant holding in a portfolio. On paper, that looks like success. But from a portfolio management perspective it raises a different question: has the portfolio become too dependent on a single investment? A great company does not necessarily make a great portfolio. Share analysis and portfolio management are different disciplines. When assessing a company, investors typically ask questions such as “Is management capable? Are earnings growing? Is the balance sheet strong? Is the valuation attractive?” Portfolio management asks different questions: “How much of your future wealth depends on one company? How exposed are you to one industry or management team? Does your portfolio still reflect your long-term objectives?” Owning an outstanding company is an investment decision. Managing the consequences of that success is a portfolio decision. When a winner becomes a risk One of the most dangerous assumptions investors can make is that a company that has performed exceptionally well over the past 20 years will inevitably do the same over the next 20. History reminds us that even the JSE’s most respected companies are not immune to severe setbacks. Concentration risk is therefore not about owning a poor-quality company. It is about becoming too dependent on the future success of any single business. A question I am often asked is, “How much is too much? Should a single share represent 20% of a portfolio? 30%? 50%?” There is no universal answer. A retired investor relying on portfolio income has different needs from an entrepreneur building wealth. Tax, liquidity, other assets and long-term objectives all matter. Yet many investors hesitate to act. Capital gains tax is usually the first concern. Others fear missing further upside or sacrificing reliable dividend income. Ironically, concentration risk often develops because investors do exactly what successful long-term investing requires: buy exceptional businesses, remain patient and allow compound growth to work over many years. For a long time, not taking action may well have been the right decision. The important question is whether it is still the right decision now. Selling is not the only answer Recognising concentration risk does not automatically mean selling. In practice, investors have far more options than simply selling. Gradual diversification may make more sense.In other cases, investors can reduce risk, create liquidity or restructure their portfolios without selling their most successful investments. Each approach involves its own trade-offs, and there is no single solution that is appropriate for every investor. Identifying concentration risk is only the first step. Deciding how to respond to it is where portfolio management truly begins. Investment success changes portfolios. Good portfolio management is about recognising when that success calls for a different strategy — before concentration becomes a risk. • Maritz is portfolio manager at Woodland Securities, a division of independent wealth management firm Woodland Wealth.Business Day