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The S&P 500 is heavily weighted toward a few large tech companies, which can introduce risk if these companies face problems. Additionally, the index has become less diversified, with technology and financial services dominating, and its valuation is higher than historical averages. To address these concerns, you can diversify further by including international stocks, mid- and small-cap stocks, and value stocks. Alternatively, consider an equally weighted S&P 500 fund to balance the influence of large companies.

Why it matters: Despite the high returns of the S&P 500 over the past 20 years, balancing your portfolio with a mix of stocks and bonds is crucial, as it impacts long-term performance and risk. The bottom line is, when you diversify, you’re also managing risks and providing flexibility within your portfolio and withdrawals.