Over the past several years, even casual investors have likely heard the term "concentration risk." One of its interpretations refers to a small number of stocks commanding outsize percentages in supposedly diverse broad-market indexes.
Indeed, that is the state of the S&P 500 today. As of Feb. 9, just five stocks accounted for approximately 27% of that index. Historically speaking, that's a higher percentage and reflects what can happen when indexes and funds weight components by market capitalization. Under that weighting methodology, when a stock's market value rises, it garners more weight in a cap-weighted index. It's that simple.
The ALPS equal-weight ETF may be a better bet than a larger rival. Image source: Getty Images.
Equal weighting is the elixir for the blues of concentration risk, and investors can tap into it through various exchange-traded funds (ETFs), including the Invesco S&P 500 Equal Weight ETF (RSP +0.23%). This $86.3 billion ETF, which turns 23 in April, tracks the S&P 500 Equal Weight index, a gauge that weights the S&P 500's holdings equally. That's easy enough for any investor to understand, but there are equal-weight alternatives to consider.
A better way to equal weighting
There's nothing wrong with the Invesco ETF per se, and although it's not a dedicated value fund, funds that equally weight stocks can benefit when smaller and value stocks are in fashion. But assigning the same allocations to individual stocks isn't the only way to go about equal weighting.
The ALPS Equal Sector Weight ETF (EQL +0.00%) proves as much. This rival to the Invesco fund equally weights the 11 sectors represented in the S&P 500 by holding the 11 Sector SPDR ETFs issued by State Street Investment Management.
It's a weighting strategy to consider, particularly at a time when the ascent of some artificial intelligence (AI) stocks has the technology sector accounting for more than a third of the cap-weighted S&P 500. Tech accounts for just 8.5% of the ALPS ETF's roster.
This ETF's approach potentially benefits investors. As of the end of the third quarter of 2025, equally weighting the S&P 500 sectors outperformed assigning the same weights to stocks over the trailing 12-month, three-, five-, and 10-year periods.
NYSEMKT: EQL
Key Data Points
One reason for the success of equal sector weighting is that the strategy doesn't water down the positive contributions from some popular stocks as much as equally weighting does. Using Nvidia as an example, neither the ALPS ETF nor the Invesco fund feature large weights to that stock, with no one stock accounting for more than 0.48% of the Invesco ETF.
It's safe to say that Nvidia's bullish contributions are diluted in that fund. By equally weighting sectors, the ALPS ETF retains a greater share of the appreciation generated by high-market-cap names.
Accomplished, but unheralded
There's no denying that among equal-weight ETFs, the Invesco S&P 500 offering is one of the largest and best-known, but investing isn't a popularity contest.
For market participants unfamiliar with the ALPS alternative, it's over 16 years old and has $634 million in assets under management. In other words, it has an audience, and as the aforementioned returns confirm, it's rewarded investors' faith. Plus, the annual expense ratio is fair at 0.27%, or $27 on a $10,000 position.
