Most investors have heard that investing in the S&P 500 is one of the best ways to create long-term wealth. It’s probably the default option in their workplace retirement plan. Even a lot of self-directed investors will put their money in the Vanguard S&P 500 ETF or the iShares Core S&P 500 ETF and call it a day. There’s a reason, after all, that these are the two largest ETFs in the world, with more than $1.6 trillion in assets combined.

The S&P 500 is many people’s only investment. That can create some problems because it leaves a whole slew of asset classes unrepresented. Including them can enhance growth opportunities, mitigate downside risk, or create a regular income stream. Without any of that to complement it, the high-tech concentration or the growth tilt of the index could mean too much volatility.

The S&P 500 is many people’s only investment. (iStock)

Key takeaways

• The S&P 500 has delivered a roughly 10% average annual return over the long term, making it a more than adequate core retirement holding.
• The top 10 holdings account for around 38% of the index. That makes it concentrated and heavily exposed to a handful of tech stocks.
• Holding just the S&P 500 means you’re excluding small caps, international stocks, fixed income, gold, and crypto. These asset classes offer important diversification benefits.
• An S&P 500 ETF is sufficient as a core portfolio holding, but retirement portfolios should have more balance.

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The case for owning only the S&P 500

It would be easy to look at the returns of the S&P 500 over the past 10 to 15 years and come to the conclusion that it’s the only investment you need. Thanks to its heavy concentration in the “Magnificent Seven” stocks, it has outperformed most sectors, styles, and themes over that time.

The S&P 500 includes many of the best companies the U.S. economy has to offer. (Spencer Platt/Getty Images)

But setting aside the performance numbers, the S&P 500 includes many of the best companies the U.S. economy has to offer. It owns companies such as Apple, Microsoft, Amazon, Walmart, JPMorgan Chase, ExxonMobil, Johnson & Johnson, and Visa. These companies produce billions of dollars in cash flow, generate huge revenues, and have been around for decades. They’re the cornerstones of the economy and will likely be around for many more decades.

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These are exactly the kinds of high-quality companies that can make a great portfolio.

The case for owning more than the S&P 500

While the S&P 500 is unquestionably a great index to invest in, it’s also incomplete.

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Here’s what investors are missing out on by investing only in the S&P 500:

• Small- and mid-caps: The Vanguard Total Stock Market ETF (NYSEMKT: VTI), which invests in the entire U.S. equity market, holds about 3,500 stocks. The 3,000 stocks not held by the S&P 500 represent about 25% of the entire U.S. equity market capitalization. Small and mid caps have an entirely different sector allocation and cyclical exposure. Omitting them means missing out on a big chunk of the U.S. economy.
• International stocks: As we’ve seen over the past year, foreign stocks can perform very well when U.S. stocks stall. They, too, have a different economic composition and are sensitive to different factors than U.S. companies.
• Fixed income: Bonds may be boring, but they can balance out portfolio risk and provide an important income component. As workers get closer to retirement, relying more on fixed income for safety and income becomes more important.
• Gold: Precious metals typically perform well during inflationary periods and geopolitical disturbances. They traditionally have a very low correlation to stocks, which makes them a great risk reducer.
• Crypto: Bitcoin and other stablecoins have become a legitimate asset class. Adding crypto as even a small piece of a broader asset allocation makes some sense.

Holding more than just U.S. large-cap stocks lets you participate in different market cycles, helps smooth out overall portfolio volatility, and can help build a portfolio more suited to your goals and risk tolerance.

Investors should own more than just the S&P 500

The S&P 500 is a great core investment, but you need more.

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I’m a big advocate of diversification and looking for ways to mitigate risk exposure. Adding different asset classes helps accomplish this. In most cases, it’s not about trying to pick winners. Simply buy the global economy and let the long-term power of compounding do the work for you.

JPMorgan Chase is an advertising partner of Motley Fool Money. David Dierking has positions in Apple and Vanguard Total Stock Market ETF. The Motley Fool has positions in and recommends Amazon, Apple, JPMorgan Chase, Microsoft, Vanguard S&P 500 ETF, Vanguard Total Stock Market ETF, Visa, and Walmart and is short shares of Apple. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

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Among the NDA constituents in the state, the BJP, Asom Gana Parishad (AGP), United People’s Party Liberal (UPPL) and Bodoland People’s Front (BPF) have members in the assembly. Rabha Hasong Joutha Sangram Samiti (RHJSS) and Janashakti Party (JP) are also part of the NDA, but they do not have any MLAs.

“Our NDA alliance is complete. We know who will contest where; it is a done deal. There is no issue in stitching the alliance,” Sarma told reporters at the state BJP headquarters.

“After every process is complete, the state leadership will meet Union Home Minister Amit Shah with the list of probable candidates,” he added.

On January 7, Sarma had said the BJP was likely to formalise its seat-sharing agreement with its allies by February 15.

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On December 5 last year, he had said the finalisation was expected to be over by January 15.
The elections for the 126-member assembly are expected to take place in March-April. This will be the first election after the delimitation exercise, done in 2023.Post delimitation, many seats and their geographical boundaries have been changed, while some non-reserved seats were reserved and vice versa. This has led to complications within the ruling and opposition coalitions.

At present, the BJP has 64 members in the assembly, while AGP has nine, UPPL has seven, and the BPF has three.

In the opposition camp, the Congress has 26 MLAs, AIUDF has 15, and CPI(M) has one. There is one Independent legislator as well.

California’s housing market is seeing an increase in inventory while the state’s population growth slows, but strong demand stemming from longstanding scarcity has kept the market tight.

An analysis by the Public Policy Institute of California (PPIC) found that the state added 677,000 housing units over a six-year period in which California’s population grew by only 39,000 residents.

Despite the relative growth in the number of housing units available, vacancy rates showed the market remained tight, with PPIC finding that owner vacancy declined from 1.2% to 0.8% while the rental vacancy rate was 4.3% in 2024, well below the national rate of 5.9%.

“Even though the state is adding more housing units than people, it was in such a deep hole that the recent successes in homebuilding are not enough to truly move the needle,” said Joel Berner, senior economist at Realtor.com.

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California’s population growth slowed, but a longstanding housing shortage has kept the market tight. (Mario Tama/Getty Images)

The state’s longstanding shortage of housing units will require more construction to get inventory levels closer to the market’s equilibrium, as the state will need 2.5 million additional homes, according to a 2022 estimate by the state’s housing agency.

PPIC’s analysis also noted a demographic trend that’s affecting California’s housing market, with average household sizes declining in recent years.

It found that California lost 82,000 households with children and gained 722,000 households without them from 2019 to 2024. 

“Fewer people living under the same roof means more roofs are required for the same number of people,” Berner said.

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California has eased rules to boost construction of accessory dwelling units (ADUs), such as this one in Concord, California. (Smith Collection/Gado/Getty Images)

The aging of California’s population is a key factor in the trend, as PPIC found that about 16.5% of the state’s population is 65 or older today and projects that number will rise to 24.9% by 2050.

Homebuilding has picked up in the state of California in the last five years, including through promoting the construction of accessory dwelling units (ADUs), which are secondary living units that are on the same lot as a primary home but are typically detached or otherwise self-contained.

“The state has made significant progress from a policy perspective on encouraging ADU construction in recent years, for which it should be commended,” Berner added. “The state has made efforts to lift local restrictions on ADUs, which is helping it to deliver more and more of them where they are needed the most.”

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California’s shortage of housing has persisted despite an uptick in construction. ( Kevin Carter/Getty Images)

Both PPIC and Berner suggested that while California is making progress, it hasn’t achieved a breakthrough in resolving its housing shortage as new homes are being snapped up quickly and vacancy rates remain low.

Berner noted that while 11.5% of the U.S. population lives in California, the state accounted for only 7.3% of newly permitted housing units last year, adding that the “pace just isn’t fast enough.”

PPIC noted that household formation rates among young adults in California have trended up, suggesting that younger residents are forming households – though the state will need sufficient lower-cost housing at entry-level prices for them to afford to take those next steps in California.

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That pipeline could prove problematic, as Realtor.com noted that of the more than 1.2 million housing units that are planned statewide, just 712,000 are designated for moderate-income households or lower – about half of what California believes it needs.

Although on Tuesday Reeves, in contrast, stressed that the red lines set out in Labour’s manifesto still stand, the chancellor has now clearly signalled a shift. She indicated in her Mais lecture that, wherever it was in Britain’s interest to do so, the government wants to align the UK’s regulatory regime with that of the EU in more areas.