Over the past few years, even the average investor has probably heard the term “concentration risk.” One explanation is that a small number of stocks account for outsized proportions of so-called diversified broad market indexes.
Indeed, this is the status quo S&P 500 Index today. As of February 9, just five stocks accounted for approximately 27% of the index. Historically, this is a higher percentage and reflects what happens when indexes and funds weight their components Market value. Under this weighting method, as a stock’s market value increases, its weight in the market-cap-weighted index increases. It’s that simple.
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Equal weighting is a panacea for eliminating concentration risk, and investors can take advantage of it in a variety of ways exchange traded funds (ETF), including Invesco S&P 500 Equal Weight ETF (NYSE:RSP). The $86.3 billion ETF, which celebrated its 23rd anniversary in April, tracks the S&P 500 Equal Weight Index, which equally weights stocks held by the S&P 500. This is easy to understand for any investor, but there are equally weighted alternatives to consider.
There’s nothing wrong with the Invesco ETF itself, even though it’s not a dedicated ETF value fundfunds with equally weighted stocks can benefit when smaller stocks and value stocks become popular. But having equal allocations to individual stocks isn’t the only way to achieve equal weighting.
this ALPS Other Sector Weight ETFs (NYSE: EQL) Proved this. The Invesco fund rival equally weights 11 sectors in the S&P 500 through its holdings in the 11-sector SPDR ETF issued by State Street Investment Management.
This is a weighting strategy worth considering, especially as some are on the rise AI (AI) Among stocks, technology stocks account for more than a third of the market-cap-weighted S&P 500 index. Technology stocks make up only 8.5% of the ALPS ETF list.
The ETF’s approach could benefit investors. Equally weighted S&P 500 sectors have outperformed equally weighted stocks over the trailing 12-month, three-year, five-year and 10-year periods through the end of the third quarter of 2025.
One reason equal sector weighting is successful is that the strategy does not dilute the positive contributions of some popular companies. stock Same as equal weight. use NVIDIA For example, both the ALPS ETF and the Invesco fund have a heavy weighting on the stock, with no stock accounting for more than 0.48% of the Invesco ETF.
