The biggest U.S. stocks have done great for you. Experts say not to get greedy
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- Mitch Goldberg of ClientFirst Strategy said the S&P 500 is "super-powered" by tech — IT alone accounts for ~37% of the index, and adding communications (Meta, Netflix) brings it to almost 50%, far more than during the dot-com era that preceded a ~50% S&P 500 loss.
- Market-weighted S&P 500 ETFs (Vanguard's VOO, BlackRock's IVV, State Street's SPY) carry concentration risk because the five smallest sectors — consumer staples, energy, utilities, real estate, and materials — make up just 14% of the index.
- Todd Rosenbluth of TMX VettaFi noted that small-cap (iShares' IJR) and international equity (iShares' IEMG) have been beating the S&P 500 this year, with Ellevest's Ankur Patel adding the S&P trades around 20x forward earnings versus 10-15x for developed international and emerging markets.
- Neena Mishra of Zacks Investment Research recommended Schwab's SCHD dividend-growth ETF (heavy in health care, consumer staples, energy) for diversifying away from mega-cap tech, plus ultra-short treasury ETFs (iShares' SGOV, Vanguard's VBIL) and gold (State Street's GLDM, BlackRock's IAUM).
- AI exposure is a second-order risk: IT and communications together make up almost half the S&P 500, so Mishra noted investors also face volatility from shifting public sentiment and potential regulatory changes around AI.
- Goldberg pushed back on the idea that S&P 500 funds are risk-less, saying decades of 401(k)-era marketing have made investors forget that the index dropped nearly 50% during the dot-com bust of 2000-2002.
Why it matters: For investors heavy in S&P 500 ETFs — including those following Buffett's 90/10 portfolio — nearly half their equity exposure now sits in two sectors dominated by a handful of mega-cap tech and AI names, meaning a sentiment or regulatory shock to that cluster could hit the entire portfolio simultaneously; Patel advises checking whether a hypothetical 20% drop would derail your plans.
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