India, Sept. 6 -- The S&P 500 is close to a record high, but investors may have a reason to be careful. The index is near its all-time high and could be heading for a fourth straight year of double-digit gains. But the strong performance may hide risks underneath the market.

One major warning sign is how expensive the S&P 500 has become. The S&P 500 Shiller CAPE ratio is now slightly above 41.The CAPE ratio has crossed 35 only twice before in the past 155 years. That makes the current level unusual.

The first warning came during the dot-com bubble. The CAPE ratio first crossed 35 in late 1999 and early 2000, when investors were paying extremely high prices for companies linked to the internet boom, according to The Motley Fool.

The CAP...