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The S&P 500 is often treated like the gold standard of investing. For many dentists, it feels like the simplest, safest way to build wealth. Put your money in an index fund, let it grow, and watch your balance rise over time.
That approach worked well in past decades, but today’s S&P 500 looks very different. The index is heavily concentrated in a small group of technology giants, making it less diversified and more volatile than many investors realize.
In a recent episode of The Dental Boardroom Podcast, PracticeCFO’s Wes Read, Brandon Hobson, and Paul Lipcius discussed why dentists should think twice before relying too heavily on the S&P 500 and how a disciplined, diversified approach can protect long-term wealth.
The S&P 500 tracks the performance of 500 large U.S. companies. Historically, that represented a balanced mix of sectors including technology, healthcare, finance, energy, and consumer goods. Today, however, the index is dominated by just a handful of names such as Apple, Microsoft, Nvidia, Amazon, and Google.
These so-called “Magnificent Seven” now make up nearly 40 percent of the total index value. This means when these companies rise or fall, the entire index follows. While they have driven huge returns in recent years, that concentration creates a hidden risk for investors.
If one or two of these companies face slower growth, the ripple effect can drag down the entire index, even if hundreds of smaller companies are performing well. What looks like diversification on paper is no longer true diversification in practice.
One of the simplest ways to measure whether the market is expensive is by looking at the price-to-earnings (P/E) ratio. The S&P 500’s trailing P/E ratio recently climbed above 30. For context, the only other times it stayed above that level for long were during the late 1990s dot-com bubble.
A high P/E ratio means investors are paying more for each dollar of earnings, expecting rapid growth in the future. That optimism can be dangerous if growth slows. As PracticeCFO’s investment team explained, the current market is already pricing in aggressive expectations for technology and AI-driven profits.
When the market expects perfection, even small disappointments can trigger corrections.
To put it simply, if you are buying into the S&P 500 right now, you are paying a premium price for stocks that may already reflect much of their future success. That limits upside potential and increases volatility risk.
Dentists are busy professionals, often managing both a practice and personal financial goals. It is understandable that many prefer the simplicity of indexing. However, blindly following an index fund can lead to several pitfalls.
What appears simple can actually expose you to more risk than you realize, particularly if your portfolio lacks balance outside of U.S. large-cap equities.
At PracticeCFO, we do not believe in market timing, but we do believe in strategy. Rather than chasing the S&P 500 blindly, our approach focuses on the factors that drive long-term performance.
Instead of weighing investments purely by market size, we use exchange-traded funds (ETFs) that target specific characteristics known as “factors.” Examples include value stocks, dividend-paying stocks, small-cap stocks, and international companies. These factors historically outperform during different parts of the economic cycle and help reduce exposure to market concentration.
We balance portfolios by including international and emerging-market stocks, which currently offer more attractive valuations than many U.S. names. As PracticeCFO’s Brandon Hobson noted, global markets often outperform in multi-year cycles, providing meaningful opportunities for growth outside the U.S.
We rebalance portfolios periodically to capture gains from assets that have outperformed and reinvest in those temporarily undervalued. This disciplined process removes emotion and enforces the classic rule of investing: buy low, sell high.
Holding bonds, cash equivalents, and alternative assets can cushion volatility when stock markets swing. These defensive tools provide liquidity and stability when needed most.
Dentists already carry significant business risk through their practices. Relying too heavily on a volatile stock index adds another layer of potential stress.
A comprehensive wealth strategy looks at both sides of your balance sheet. It aligns your investments with your practice’s financial realities, debt obligations, and personal goals. That is why PracticeCFO helps clients create investment policy statements that define risk tolerance and long-term objectives.
With that roadmap, investment decisions become purposeful instead of reactive. You are not chasing performance. You are following a plan.
Market headlines change daily, but the principles of sound investing remain constant. Dentists who succeed financially do so because they focus on discipline, not prediction.
When stock prices surge, it can feel tempting to pour more money into what is hot. When they fall, the instinct to pull back can be just as strong. Both reactions are emotional, not strategic. A consistent, rules-based approach allows your portfolio to capture growth over time without falling victim to short-term swings.
As Wes Read shared in the podcast, being “robotic” in your investing habits is actually a good thing. Automating contributions to retirement accounts, sticking to your investment plan, and staying diversified are what lead to true financial independence.
The S&P 500 may still be a useful benchmark, but it is no longer the safe, balanced portfolio it once was. Its growing dependence on a few technology giants makes it more vulnerable to downturns and less representative of the broader economy.
For dentists building wealth, a smarter strategy is to stay diversified, invest across multiple asset classes, and lean on professional guidance to ensure your portfolio reflects both opportunity and caution.
By following a structured plan rather than chasing headlines, you will protect your wealth from market extremes and keep your financial future on course.Want to learn more about how today’s market trends affect your investment strategy?
Listen to this episode of The Dental Boardroom Podcast
Join Wes Read and the PracticeCFO investment team as they share insights on smart investing for dentists and how to manage your money with confidence.
Wes knows what's best for dental practices. He's been doing this for a long time and he sees lots of practices. He can tell me how our practice is doing, and what we can do to increase our productivity. With past CPA's, there were no ideas. It was all coming from me, saying "I think I can do better, but I don't know how." I come in to meet with Wes and he says "You CAN do better, and I know how."
PracticeCFO is in hundreds of dental offices around the country. They know what numbers should look like. They know what percentages of payroll, rent and supplies should be, and they will hold you accountable to those numbers, which will really help you stick to your plan and your path of growth and savings. That is invaluable
Whenever something comes up, whether it's building or practice related and we weren't sure where the numbers would go, PracticeCFO has been instrumental in helping us figure that out. I can't say enough of how important that is - that it goes beyond that initial partnership. They make sure this business marriage works.
When I go home from work, I don't spend a whole lot of time stressing about what my books look like, or how much I owe in taxes. By using PracticeCFO, the burden of keeping track of a lot of the big financial numbers and metrics are taken off my plate.
PracticeCFO helped me develop a plan for the future. I have colleagues that work with other accountants that don't have a plan - they just look at the numbers of the practice and that's it. There's no plan for 10, 20 years from now. But with PracticeCFO, you get that. PracticeCFO makes you feel like you're they're only client.
(In reference to his practice sale) What could've been super stressful, wasn't! When picking John and Wes, it was from word of mouth recommendations and other people's experiences from the past that really did it for me. And it turns out that those recommendations were right on the line.
Wes knows the business side of dentistry. His comprehensive plan will organize your personal and professional finances so you can focus on taking care of patients. Massive ROI.
I can’t say enough good things about everyone at PracticeCFO. Everyone on the team is professional, organized, knowledgeable, helpful and kind. They also respond to emails and phone calls immediately and are always happy to help. They have helped me navigate year-to-year as a business owner. PracticeCFO gives me peace of mind that my business is in good hands.
I love Practice CFO! They have helped me obtain a practice and maintain a practice. They are incredible people who are on top of everything and make owning and running the business portion of a practice easy. They couldn’t be better for my business and my sanity. They have every detail of the business and taxes taken care of where all I have to do is show up and follow their easy steps to success!
Practice CFO has the best tools I’ve seen for personal tax and financial planning in addition to top-tier corporate tax and accounting services. I have been very pleased with the level of quality service. They manage my monthly bookkeeping and accounts payable. It is a great system and saves me a ton of time, and it allows us to have monthly financial statements within a week of month end.
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