The S&P 500 has long been seen as a shorthand for diversification. After all, it holds 500 companies across different sectors—how much more diversified can you get?
But dig a little deeper and the picture changes. Today, just a handful of the largest tech companies make up more than 30% of the index. That means when you invest in the S&P 500, your returns are heavily tied to the performance of only a few stocks. If those companies soar, the index looks great. If they stumble, the “diversified” portfolio feels it across the board.
And history shows why this matters. From 2000–2010—the so-called “lost decade”—the S&P 500 returned just about negative 1% per year annualized. An entire decade of flat-to-negative returns, even though other parts of the market (like bonds or international stocks) did much better.
Diversification isn’t just about owning lots of names—it’s about balance. True diversification spreads risk across industries, company sizes, and even asset classes. Relying too much on one index, no matter how popular, can give you the illusion of safety without the reality of it.
Next step: Take a closer look at your portfolio. Do you have real diversification, or just the appearance of it?
Did You Know?
Your employer sponsors this financial wellness benefit from Francis. The benefit connects you with down-to-earth financial planners who educate and advise on any money matters…without the sales pitch. We are exclusively engaged by employers like yours and have no investment products to sell, so you can feel confident that you will always receive objective advice.
Your financial planner will help you set priorities and achieve your money goals, without judgment or financial jargon. Know that all discussions are kept strictly confidential. This service is offered as an employee benefit with no per-session co-pays, so you can meet with a financial planner as often as you wish. Services are paid by your retirement plan or your employer.
Connecting with a financial planner is easy! Here’s how:
- Visit FrancisWay.com > Services > Participant Portal
- Call (866) 232-6457
Download the free mobile app (Search for Francis LLC)
