The Evolution of the S&P 500 and Diversification Strategies

By Nicole Young on August 18, 2025

Written by Randy Porzel, CFP®, RICP® for Greet Western Springs

The S&P 500, as we know it today, was officially launched on March 4, 1957. And while the average annualized return of the index has been around 10%, the makeup of the index has changed drastically over the years. Prior to 1980, the index was mostly comprised of industrial and energy companies, like General Electric and US Steel. As technology became a larger part of our economy in the 1980’s, we saw the emergence of technology and financial services companies like IBM, Microsoft, Intel, and Cisco. And since the “Dot-Com” Bubble in the late 1990’s and into the 2000’s, we’ve seen the rise of e-commerce and internet companies like Amazon, Alphabet, Apple, and Meta grow to be the leaders of the index.

As investors, we have all been the beneficiaries of these trailblazing companies as they became leaders in the global economy. And while many investors yearn for more exposure to the latest market leaders, it’s important to understand the history of the S&P 500 and how it’s changed over the years.

For example, in 1990, the top 10 positions in the S&P 500 were IBM, Exxon Mobil, GE, Phillip Morris, Shell, Bristol Myers Squibb, Merck, Walmart, AT&T, and Coca Cola. Because the index is market cap weighted, where the largest companies carry a larger weight in the index, these 10 positions accounted for nearly 20% of the index. As we look at the same index today, none of these positions are in the top 10, and only 2 made the top 20 list. Additionally, the current top 10 largest positions in the S&P 500 now make up nearly 40% of the index.

As Financial Planners, our role is to assist clients with their investment returns while managing risk to achieve their financial goals. This may involve exercising caution when investing in trending stocks like Zoom and DocuSign during the COVID-19 pandemic or in cannabis stocks as states decriminalize or legalize recreational marijuana. Additionally, we often advise employees of publicly traded companies to diversify away from company-specific stock holdings that constitute their primary income source. Historical failures such as Lehman Brothers, Enron, and General Motors serve as reminders to avoid overconcentration in any single asset. For some investors, this means avoiding excessive reliance on individual stocks. For others, it involves balancing company stock holdings with broader diversification strategies, including indices like the S&P 500. At Private Vista, we believe a diversified portfolio includes indices like the S&P 500 but also recognize the concentration of the index and look to diversify to other sectors and geographic regions to help ensure long-term financial stability for you and your family.

Private Vista, LLC is a group comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC (member FINRA and SIPC). Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC.

This is not an offer to buy or sell securities, nor should anything contained herein be construed as a recommendation or advice of any kind. Consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. No investment process is free of risk, and there is no guarantee that any investment process or investment opportunities will be profitable or suitable for all investors. Past performance is neither indicative nor a guarantee of future results. You cannot invest directly in an index.

These materials were created for informational purposes only; the opinions and positions stated are those of the author(s) and are not necessarily the official opinion or position of Hightower Advisors, LLC or its affiliates (“Hightower”). Any examples used are for illustrative purposes only and based on generic assumptions. All data or other information referenced is from sources believed to be reliable but not independently verified. Information provided is as of the date referenced and is subject to change without notice. Hightower assumes no liability for any action made or taken in reliance on or relating in any way to this information. Hightower makes no representations or warranties, express or implied, as to the accuracy or completeness of the information, for statements or errors or omissions, or results obtained from the use of this information. References to any person, organization, or the inclusion of external hyperlinks does not constitute endorsement (or guarantee of accuracy or safety) by Hightower of any such person, organization or linked website or the information, products or services contained therein.

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