The S&P 500 benchmark index is just under an all-time high as of this writing, and has essentially gone straight up since early April's lows. In fact, since that time, the index has gained a staggering 33% in just over five months, as U.S. President Donald Trump's "reciprocal tariff" plan ended up being not nearly as harsh as originally thought once it was implemented.
However, not all of the components of the S&P 500 have performed well. In fact, much of the index's strong performance can be attributed to some of the largest technology companies in the world. Consider these year-to-date returns through Sept. 24:
- So far in 2025, the S&P 500 has gained 13%.
- Chipmaking heavyweight Nvidia (NVDA +5.93%) is up 32%.
- Trillion-dollar tech company Broadcom (AVGO 0.52%) is higher by more than 46%.
- Alphabet (GOOGL +2.53%) (GOOG +2.92%) has gained 31% this year.
There are more examples, but the point is that because the S&P 500 is a weighted index, larger companies contribute more of the performance. In fact, if you get rid of all the weighting and simply consider all 500 components equally, the S&P 500's gain for the year would be just 7.5%. This could be the best approach to investing in large U.S. companies -- and there is an exchange-traded fund (ETF) that allows you to do it.
Image source: Getty Images.
The equal-weight S&P 500
Meet the Invesco S&P 500 Equal Weight ETF (RSP +0.79%). Just like the popular S&P 500 ETFs, like the Vanguard S&P 500 Index Fund (VOO +1.47%), it invests in all 500 companies that make up the index, but with one big difference. Instead of each stock having a performance effect, or weight, proportional to its market cap, each one counts the same. To illustrate this, consider how the largest companies in the stock market affect each fund.
|
Company (Symbol) |
% of S&P 500 |
Weight in Equal-Weight S&P 500 Index Fund |
|---|---|---|
|
Nvidia (NVDA) |
8.1% |
0.2% |
|
Microsoft (MSFT +0.66%) |
7.4% |
0.2% |
|
Apple (AAPL +1.18%) |
5.8% |
0.2% |
|
Amazon.com (AMZN +0.53%) |
4.1% |
0.2% |
|
Alphabet (GOOG)(GOOGL) |
3.7% |
0.2% |
Data source: Vanguard. Weights as of 8/31/2025.
Another way to think about this is that companies like Nvidia and Microsoft have the exact same weight in the fund as smaller S&P 500 components such as McCormick (MKC +0.04%) and Best Buy (BBY +2.48%).
Why invest in the equal-weight S&P 500?
There is a value and performance disconnect between the big-cap tech stocks (and the tech sector in general) and the rest of the S&P 500. Investing in the equal-weight version can help you get more exposure to the other areas of the market that aren't trading at such frothy valuations. It can also insulate you from volatility in those larger names.
For example, if Nvidia has a terrible day, it can drag the entire S&P 500 down all by itself (and it's happened on numerous occasions). With the equal-weight ETF, even if one of the components plunges by 50%, the overall effect on your investment would be minimal.
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Key Data Points
Finally, don't think that you're giving up long-term return potential just because the equal-weight ETF has less exposure to the large, high-flying stocks. In fact, since 1990, the S&P 500 Equal Weight index has outperformed the standard S&P 500 -- by nearly 500 percentage points.
Of course, there are some drawbacks to consider, and cost is a big one. While the Vanguard S&P 500 ETF has an expense ratio of just 0.03%, the Invesco S&P 500 Equal Weight ETF has a significantly higher 0.20% annual fee structure. This is still rather low for an ETF, and a slightly higher fee is to be expected with a more unique or specialized ETF, but it's worth taking into account.
With the markets at record highs and a performance disconnect between the largest of the large U.S. companies and everything else, investing in the equal-weight version makes a lot of sense right now.
