Avoid the Top-Heavy S&P 500 With Equal-Weight ETFs

Key Points

• Equal-weight ETFs may target the same basket of companies as popular funds focused on the S&P 500, Russell 1000, or other well-known indices, but with a unique approach to balancing portfolios.
• Equal-weight funds focused on the S&P 500 and the NASDAQ-100 have underperformed their plain vanilla rivals, while a similar fund targeting the Russell 1000 has dominated year-to-date.
• Funds of this type offer added exposure to some of the lesser-known or smaller names in these iconic indices, but they may do so at a somewhat higher price tag than traditional broad index-based ETFs.

A small number of AI-focused tech stocks dominated in 2025, helping to send the S&P 500 up more than 16% for the year but leaving investors potentially exposed to undue risk in the process. Concerns about an AI bubble—and the potentially devastating impact of a continued war in Iran and oil market disturbances on the data center space—may make investors worry about possible overweighting of this industry in their broader market investments.

One way to mitigate this automatic focus on AI and tech is through exchange-traded funds (ETFs) with an equal-weight strategy. By offering similar weightings to each component of a targeted index, these funds reduce the impact of overconcentration while boosting investor access to often-overlooked companies, particularly those with smaller market capitalizations. The funds below are worth considering for investors tired of broad-based ETFs that may provide more exposure to certain corners of the market than they would like.

Equal Weight Alternative to SPY With Higher Fees But Potential Protection

The Invesco S&P 500 Equal Weight ETF NYSEARCA: RSP fell by about 1% the week ending March 13, one of its worst five-day trading periods in several months. However, the fund is still up close to 1% year-to-date (YTD), which places it ahead of the broader S&P 500 over the same time period.

This may help convince some investors of the wisdom behind RSP's strategy, which includes companies in the S&P 500 in its portfolio but with no position receiving more than about 0.5% of the portfolio allocation.

RSP is a natural comparison against the SPDR S&P 500 ETF Trust NYSEARCA: SPY and other low-cost broad S&P funds. Given the direct overlap in their portfolios, it's unlikely that an investor would want to hold both RSP and another S&P fund simultaneously. With its unique equal-weight focus, RSP does carry a higher annual fee than many of those alternatives: it has an expense ratio of 0.2% while SPY, for instance, is just 0.09%.

Liquidity is also often more attractive for large S&P funds like SPY, which are among the most popular and widely traded ETFs.

RSP's appeal, then, is in its ability to help to weather potential storms impacting the most heavily weighted companies in the S&P. Its dividend yield of 1.6% is another bonus, as it is somewhat higher than SPY's yield of 1.1%.

A Growth and Quality Spin on the QQQ

The First Trust NASDAQ-100 Select Equal Weight ETF NASDAQ: QQEW adopts a similar approach to RSP above, but with a focus on the stocks of the NASDAQ-100 index. This index famously includes many of the largest and most influential non-financial companies in the world and is accessible via ultra-popular ETFs like the Invesco QQQ NASDAQ: QQQ.

However, while QQQ provides full exposure to the underlying index—including leaning strongly into its most heavily weighted names—QQEW takes a unique approach. This fund assesses each NASDAQ-100 stock based on growth and quality factors, including revenue, forward earnings per share estimate, and cash flow growth rates. The top 50 components based on those additional factors then make up QQEW's portfolio and are assigned roughly equal weights.

QQEW has underperformed the QQQ thus far in 2026, but investors skeptical of the QQQ's tech skew may still opt for QQEW.

Its focus on growth-oriented companies may make it particularly appealing to long-term buy-and-hold investors. However, its expense ratio of 0.55% is more than three times that of the QQQ.

An Equal-Weight Approach to the Russell 1000

Another variation on the strategy employed by RSP can be found with the Invesco Russell 1000 Equal Weight ETF NYSEARCA: EQAL. For an annual fee of 0.2%, EQAL offers roughly equal-weight exposure to the 1,000 stocks making up the Russell 1000 Index.

With this approach, EQAL tilts its portfolio toward smaller names in the Russell index, and all sectors are (nearly) equally weighted. This is very different from a fund that is exactly based on the Russell 1000, which allocates about a third of its weight to tech stocks and also overemphasizes financials.

EQAL's appeal may lie in its ability to boost mid-cap names relative to pure-play Russell funds. With a YTD return of nearly 5%, it has also outperformed the Russell 1000 so far in 2026. Still, EQAL will have to outperform to continue appealing to investors, given the higher fees it charges compared to straightforward Russell 1000 fund alternatives.