The Australian share market is heavily weighted towards a small handful of companies which, in turn, dominate as positions within the portfolios of many investors.

This was recently highlighted by the SelfWealth network which showed that nine of the country’s biggest public corporations were among the 10 most widely-held shares of the typical self-managed super fund, or SMSF, portfolio.

As you would expect, companies such as BHP Billiton Limited (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Telstra Corporation Ltd (ASX: TLS) and Australia and New Zealand Banking Group (ASX: ANZ) were at the top of the list. All four of the major banks were in the top 10, together with Wesfarmers Ltd (ASX: WES) and Woolworths Limited (ASX: WOW), amongst others.

I would wager that the portfolios of many non-SMSF portfolios are also dominated by these businesses.

The reasons why some investors are attracted to these businesses vary, but largely come down to familiarity, their solid dividend yields (especially the fully franked ones) and their perceived level of safety. After all, it’s difficult to picture a world without Woolworths or Coles, or without one of the major banks.

But investors do need to be careful. As my colleague Mike King wrote earlier this week, the S&P/ASX 20 (Index: ^AXTL) (ASX: XTL) has underperformed the broader S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in recent times, despite the fact that blue chips account for the vast majority of the larger index.

This reflects the fact that those shares have been sold off more heavily than many of the other shares in the ASX 200, perhaps reflecting that investors are cluing onto the risks and potential headwinds facing those businesses.

Take Woolworths, as an example. The retailer is battling a decline in growth as other businesses such as Coles and Aldi take its market share away. BHP and Rio Tinto Limited (ASX: RIO) are fighting against declining commodity prices, while the banks haven’t been truly tested in almost a quarter of a century, when Australia experienced its last recession.

Some investors would argue that now is the time to buy shares in these businesses and, in some cases, they may be right. But investors do also need to remember that, despite their size, the blue-chips are not immune from risk and that there could be far better investment opportunities out there to capitalise on instead.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.