Forget Invesco's S&P 500 ETF and Buy This Instead

Over the past respective years, adjacent casual investors person apt heard the word "concentration risk." One of its interpretations refers to a tiny fig of stocks commanding outsize percentages successful supposedly divers broad-market indexes.

Indeed, that is the authorities of the S&P 500 today. As of Feb. 9, conscionable 5 stocks accounted for astir 27% of that index. Historically speaking, that's a higher percent and reflects what tin hap erstwhile indexes and funds value components by market capitalization. Under that weighting methodology, erstwhile a stock's marketplace worth rises, it garners much value successful a cap-weighted index. It's that simple.

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Equal weighting is the elixir for the blues of attraction risk, and investors tin pat into it done assorted exchange-traded funds (ETFs), including the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP). This $86.3 cardinal ETF, which turns 23 successful April, tracks the S&P 500 Equal Weight index, a gauge that weights the S&P 500's holdings equally. That's casual capable for immoderate capitalist to understand, but determination are equal-weight alternatives to consider.

There's thing incorrect with the Invesco ETF per se, and though it's not a dedicated value fund, funds that arsenic value stocks tin payment erstwhile smaller and worth stocks are successful fashion. But assigning the aforesaid allocations to idiosyncratic stocks isn't the lone mode to spell astir adjacent weighting.

The ALPS Equal Sector Weight ETF (NYSEMKT: EQL) proves arsenic much. This rival to the Invesco money arsenic weights the 11 sectors represented successful the S&P 500 by holding the 11 Sector SPDR ETFs issued by State Street Investment Management.

It's a weighting strategy to consider, peculiarly astatine a clip erstwhile the ascent of immoderate artificial intelligence (AI) stocks has the exertion assemblage accounting for much than a 3rd of the cap-weighted S&P 500. Tech accounts for conscionable 8.5% of the ALPS ETF's roster.

This ETF's attack perchance benefits investors. As of the extremity of the 3rd 4th of 2025, arsenic weighting the S&P 500 sectors outperformed assigning the aforesaid weights to stocks implicit the trailing 12-month, three-, five-, and 10-year periods.

One crushed for the occurrence of adjacent assemblage weighting is that the strategy doesn't h2o down the affirmative contributions from immoderate fashionable stocks arsenic overmuch arsenic as weighting does. Using Nvidia as an example, neither the ALPS ETF nor the Invesco money diagnostic ample weights to that stock, with nary 1 banal accounting for much than 0.48% of the Invesco ETF.