Just 10 Stocks Make Up Nearly 40% of the S&P 500. Here's an ETF That Can Help You Diversify.

The S&P 500 Index, represented by the Vanguard S&P 500 ETF, is a widely-used benchmark for a diversified U.S. stock market portfolio. However, ten companies account for nearly 40% of the index's value, up from 17% in 2015, reflecting the increasing concentration of market power among a handful of technology giants. This concentration poses a risk to investors, as returns may be highly dependent on the performance of a few stocks.

To mitigate this risk, investors can consider adding the Schwab International Dividend Equity ETF to their portfolio. This ETF offers exposure to international, high-yielding dividend-paying companies, providing a different set of assets that complement the S&P 500. The Schwab International Dividend Equity ETF's international diversification and focus on lower-volatility, dividend-paying stocks can help reduce portfolio risk and volatility.

However, the Schwab International Dividend Equity ETF has its own limitations. It has a lower growth profile, its top 10 holdings account for 40% of its value, and it is exposed to foreign exchange risk. Nevertheless, combining this ETF with the Vanguard S&P 500 ETF could provide a more balanced investment approach, diversifying the portfolio across growth and dividend sectors while still maintaining a strong U.S. equity foundation.