A popular and effective piece of investment advice is to invest in a low-cost S&P 500 index fund. These funds provide a cost-efficient way to tap into the long-term growth of the economy by offering a diversified portfolio of stocks.

However, concerns have been raised about the increasing concentration within market indexes like the S&P 500. As a market-cap weighted index, the S&P 500 gives more weight to higher-valued companies. Consequently, a few large tech companies, such as Apple and Microsoft, dominate the index, with just seven stocks representing nearly 30 percent of the S&P 500 as of April 2024.

To address this concentration risk, consider equal-weight index funds. These funds allocate an equal proportion of their holdings to each stock within the index, resulting in a roughly 0.2 percent allocation per company in the S&P 500, for example.

Here are some top equal-weight index funds to consider for your investment portfolio.

What are equal-weight index funds?

Equal-weight index funds distribute equal proportions of their holdings across all stocks within a particular index, rather than adhering to their market-cap weights. For instance, as of April 2024, Microsoft (MSFT) is the largest company in the S&P 500, representing 7.08 percent of the index.

In contrast, an equal-weight S&P 500 index fund allocates just 0.2 percent to Microsoft, the same as it does to each of the other roughly 500 stocks in the fund. This approach ensures that each stock holds an equal share in the portfolio.

Investors may opt for an equal-weight fund to reduce their exposure to the largest companies or to increase their investment in smaller stocks within the index. If you’re concerned about the concentration risk in the S&P 500, an equal-weight fund can help manage this risk.

Top equal-weight index funds

Invesco S&P 500 Equal Weight ETF (RSP)

The Invesco S&P 500 Equal Weight ETF tracks an equal-weighted S&P 500 index, rebalanced quarterly to provide balanced exposure to all constituents. This approach reduces concentration risk compared to market-cap weighted indexes and enhances exposure to smaller companies.

  • 5-Year Annualized Returns: 11.2%
  • Expense Ratio: 0.20%
  • Assets Under Management: $55.4 billion
  • Dividend Yield: 1.8%

Goldman Sachs Equal Weight U.S. Large Cap Equity ETF (GSEW)

The Goldman Sachs Equal Weight U.S. Large Cap Equity ETF follows an index that equal-weights the largest U.S. stocks and is rebalanced monthly. The fund aims to mitigate the impact of isolated market events and adapt to various market conditions.

  • 5-Year Annualized Returns: 10.9%
  • Expense Ratio: 0.09%
  • Assets Under Management: $687.4 million
  • Dividend Yield: 1.6%

Invesco Russell 1000 Equal Weight ETF (EQAL)

The Invesco Russell 1000 Equal Weight ETF tracks the Russell 1000 Equal Weight Index, rebalanced quarterly. It offers equal exposure across all 11 sectors, with each stock receiving an equal weight within its sector.

  • 5-Year Annualized Returns: 8.9%
  • Expense Ratio: 0.20%
  • Assets Under Management: $594.5 million
  • Dividend Yield: 1.9%

Direxion Nasdaq-100 Equal Weighted Index Shares (QQQE)

The Direxion Nasdaq-100 Equal Weighted Index Shares seeks to mirror the performance of the Nasdaq-100 Equal Weight Index. This index includes 100 of the largest non-financial companies listed on Nasdaq, with each stock initially weighted at 1% and rebalanced quarterly.

  • 5-Year Annualized Returns: 13.6%
  • Expense Ratio: 0.35%
  • Assets Under Management: $1.2 billion
  • Dividend Yield: 0.9%

iShares MSCI USA Equal Weighted ETF (EUSA)

The iShares MSCI USA Equal Weighted ETF tracks an equal-weighted index of U.S. stocks, offering broader exposure to mid-cap stocks while reducing the concentration in the largest companies. The fund holds over 600 stocks.

  • 5-Year Annualized Returns: 10.5%
  • Expense Ratio: 0.09%
  • Assets Under Management: $733.1 million
  • Dividend Yield: 1.5%

First Trust Dow 30 Equal Weight ETF (EDOW)

The First Trust Dow 30 Equal Weight ETF aims to replicate the Dow Jones Industrial Average Equal Weight Index. Unlike the traditional Dow, which is price-weighted, this fund holds each of the 30 Dow stocks in equal proportions.

  • 5-Year Annualized Returns: 9.3%
  • Expense Ratio: 0.50%
  • Assets Under Management: $231.7 million
  • Dividend Yield: 1.9%