Why These 3 Equal Weight ETFs Have Outperformed the S&P This Year

Key Points

• Equal-weight ETFs reduce concentration risk by giving each holding similar allocation, offering diversification benefits as market leadership broadens beyond mega-cap tech stocks.
• The Astoria US Quality Kings ETF, Invesco S&P 500 Equal Weight Technology ETF, and Amplify Bloomberg AI Value Chain ETF have all posted strong year-to-date returns using this approach.
• These equal-weight funds have outperformed traditional market-cap-weighted benchmarks like the S&P 500 and XLK this year, though they typically charge higher expense ratios.

When it comes to compiling ETFs and index funds, market-cap weighting is the standard approach—starting with the S&P 500 and extending to many major benchmarks and smaller indices.

Bigger companies have greater representation, which is all well and good when market moves are dictated by a small number of mega-cap stocks and those stocks are trending upward. However, risk-conscious investors may be leery when it comes to concentrating too much of their assets in a handful of giant companies—and even stalwart S&P funds miss out on outsized wins down the portfolio when smaller stocks take off on a rally.

One way to counter this issue is with equal-weight exchange-traded funds (ETFs). These vehicles provide each stock in an index the same (or nearly the same) weight in a portfolio, reducing the concentration risk associated with any single position and providing a more diversified approach. As market leadership has broadened beyond massive tech firms, and health care and financials stocks are currently performing well, equal-weight funds can benefit from their much larger allocations to these sectors.

A Quality Fund With Sector Diversification

One of the advantages of an equal-weight fund is that it can offer greater exposure to smaller companies than a traditional market-cap-weighted alternative. The Astoria US Quality Kings ETF NASDAQ: ROE adds an active management element as well, allowing the fund to be highly responsive to shifts in the market as managers can adjust its large- and mid-cap holdings on the fly.

ROE also uses a sector-optimization approach that screens for high-quality stocks across different market segments, ensuring that its roughly 100 positions are representative of many industries. The fund even provides a reasonable dividend yield of 0.96% for some extra income.

The real strength of this ETF, though, is in its price performance: ROE has returned more than 22% year to date (YTD), solidly beating the S&P 500 and even the tech-heavy Nasdaq-100. This performance comes at a fairly modest price tag for an actively managed fund, too, with an expense ratio of 0.49%.

Equal-Weighting the Tech Space Pays Off

Despite the AI sell-off, the tech sector remains one of the strongest parts of the market, and the Invesco S&P 500 Equal Weight Technology ETF NYSEARCA: RSPT employs an equal-weight approach in this space. RSPT holds about 75 stocks from the tech space, nearly all of which are large-caps.

The result is that investors do still get exposure to the wins of major players like NVIDIA Corp. NASDAQ: NVDA and Apple Inc. NASDAQ: AAPL, but without those companies completely dominating lesser-known names.

The proof of RSPT's success in 2026 comes down to its results: this fund has returned about 41% YTD, while the State Street Technology Select Sector SPDR ETF NYSEARCA: XLK, a modified market-cap-weighted tech fund often used as a benchmark for the sector, has returned only 28% over the same period. Granted, investors will pay a slight premium for RSPT's approach, as the fund has an annual fee of 0.40% compared to 0.08% for XLK. Still, in the tech space, a less concentrated approach has been more successful so far this year.

AI Gets Equal Weight Treatment and Solidly Outperforms

Even the niche part of the market that has seen a huge amount of investor attention this year—the AI space—has access to equal-weight funds. The Amplify Bloomberg AI Value Chain ETF NYSEARCA: AIVC targets companies across the AI value chain, including those involved in semiconductor and hardware manufacturing, cloud computing, and more. The fund holds about 50 positions with a global reach, although no single stock is allocated more than 3% of assets.

The result is a fund that capitalizes on one of the hottest trends of the year without relying too heavily on individual names. Smaller niche firms have a greater opportunity to shine when they do well, and major tech players can't have quite as negative an impact if they decline.

AIVC's expense ratio of 0.59% is on the high side, particularly given that many broader tech ETFs will provide access to lots of the same constituents. However, AIVC has managed to ride out the turbulence of the AI industry, returning more than 60% YTD despite recent volatility. This may make the higher annual fee well worth it, particularly for investors convinced of AI's dominance and the likelihood that sustained demand for this technology could make a group of new superstar tech names going forward.

Continue following MarketBeat

Add MarketBeat as your preferred source on Google to see our latest stories in your feed.

Add As Preferred Source