Key Points
-
The Vanguard S&P 500 ETF is one of the largest investment vehicles in the world, and for good reason.
-
Over the past few years, the S&P 500 has become increasingly top-heavy.
-
The Invesco S&P 500 Equal Weight ETF offers broad exposure without the concentration risk.
- 10 stocks we like better than Invesco S&P 500 Equal Weight ETF ›
The Vanguard S&P 500 ETF (NYSEMKT: VOO) is one of the most popular investment vehicles in the world. Including the mutual fund version of the ETF, there is $1.6 trillion in total assets invested in the low-cost Vanguard product.
To be clear, there are good reasons why so many investors use the Vanguard S&P 500 ETF as the backbone of their portfolios. The S&P 500 is considered the best indicator of how U.S. large-cap companies are doing, and Vanguard’s version has a rock-bottom 0.03% expense ratio, making it an extremely cost-effective way to get exposure.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
1 big problem with the S&P 500
The S&P 500 has produced extraordinary returns over the past decade or so, and the biggest reason why is the stellar performance of the mega-cap tech stocks. But this has also produced what I consider to be the biggest drawback of investing in the S&P 500 — it has become extremely top-heavy.
Image source: Getty Images.
Nvidia (NASDAQ: NVDA) alone makes up nearly 8% of the benchmark index, and Apple (NASDAQ: AAPL) now accounts for about 6.5%. The 10 largest companies in the S&P 500 now make up 40% of the index. And the 22 largest S&P companies account for as much of the index’s weight as the 478 smallest names in the index.
In a nutshell, by investing in the S&P 500, you’re betting heavily on the largest companies in the market. If one of the top stocks performs poorly, it can drag the index lower all by itself.
I’d buy this alternative instead
One way to invest in the S&P 500 without the concentration risk is with the Invesco Equal Weight S&P 500 ETF (NYSEMKT: RSP). Just as with the Vanguard S&P 500 ETF, you’ll invest in the 500 large-cap companies that make up the index, with the big difference that an equal amount of money will be invested in every single company.
In other words, each of the 500 companies accounts for about 0.2% of the ETF’s assets. This means that a relatively small S&P 500 component like First Solar (NASDAQ: FSLR), or eBay (NASDAQ: EBAY), carries the exact same weight in the index as Apple or Nvidia.
Here’s what this means to you. The Invesco Equal Weight ETF still gives you broad-based exposure to American business — just without the concentration risk. For example, if Nvidia were to fall by 20% due to a bad earnings report, you’d barely notice it in the performance of this ETF.
Finally, you might be surprised to learn that over the long term, the equal-weight S&P 500 has actually marginally outperformed the traditional version of the index. Of course, there’s no guarantee that this will happen in the future, but the point is that you can get similar wealth-building potential with less exposure to the mega-cap tech stocks.
Should you buy stock in Invesco S&P 500 Equal Weight ETF right now?
Before you buy stock in Invesco S&P 500 Equal Weight ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Invesco S&P 500 Equal Weight ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $477,813!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,320,088!*
Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 208% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of May 27, 2026.
Matt Frankel, CFP has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Apple, First Solar, Nvidia, Vanguard S&P 500 ETF, and eBay. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
