Equal-weight exchange-traded funds are attracting renewed investor interest as the dominance of the largest U.S. companies in major stock indexes begins to weaken, giving investors a way to reduce concentration risk while maintaining broad exposure to equities.
The strategy is not new, but its appeal has increased sharply this year as several mega-cap technology and growth stocks that drove a disproportionate share of market gains in recent years have struggled to maintain their leadership.
Equal-weight ETFs assign the same weight to every company in an underlying index, unlike traditional market-capitalization-weighted funds, which allocate more money to companies with larger market values. That difference can materially change portfolio exposure when a small group of mega-cap stocks accounts for a large share of an index.
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According to CNBC, the Invesco S&P 500 Equal Weight ETF, known by its ticker RSP, has emerged as the biggest beneficiary of the shift. The fund, the oldest and largest ETF using the equal-weight strategy, has attracted more than $12 billion in net assets this year, pushing its assets under management above $100 billion for the first time.
RSP has also outperformed the market-cap-weighted S&P 500 by roughly 3 percentage points through Aug. 21.
“All of a sudden, people are paying attention,” said Cinthia Murphy, director of research at VettaFi.
Murphy said equal-weight strategies can lose investor attention when markets are dominated by a narrow group of stocks, as happened during the period when the so-called Magnificent Seven delivered outsized returns.
The Magnificent Seven, comprising Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla, account for roughly one-third of the S&P 500. Their enormous market values mean movements in those companies can have a significant impact on the index even when the majority of its constituents are performing differently.
That concentration has become a growing concern as investors assess the enormous capital spending required to develop artificial intelligence infrastructure.
The Magnificent Seven were roughly flat in the first half of 2026, while the S&P 500 gained 9.3%, according to the data cited in the report. The divergence has helped broaden market leadership and strengthened the case for strategies that give smaller constituents a greater influence on portfolio performance.
“Investors have grown increasingly concerned about the concentration risk embedded in major indices such as the S&P 500, where the top 10 names account for nearly 40% of the index,” said Nathan Geraci, president of NovaDius.
He said the concentration matters because much of it is tied to AI and major hyperscalers, where investors are increasingly questioning high valuations and whether the industry’s enormous capital expenditures will ultimately generate adequate returns.
“Equal weighting solves the problem of concentration risk and allows investors to participate more fully if market leadership continues to broaden,” Geraci said.
The appeal of equal weighting is therefore not necessarily a rejection of large technology companies or the AI investment cycle. Instead, it provides a way for investors to maintain exposure to the overall market without allowing the largest companies to dominate portfolio returns.
That distinction has become more important as earnings growth begins to spread beyond the largest technology companies.
“The market has been talking about the need to diversify from the Mag 7 for years, and we’re actually seeing that playbook work,” Murphy said.
“It’s not all about the Mag 7. Other stocks are catching up, earnings growth is strong in the other 493 [of the S&P 500 Index], projections for earnings for the other 493 are strong. This is supportive for equal weighting,” she added.
The strategy also provides a different risk profile from conventional S&P 500 funds. Because every company receives the same allocation, a smaller company can have as much influence on returns as Nvidia or Microsoft, provided it remains in the index.
That can increase exposure to mid-cap characteristics and reduce dependence on the performance of a handful of companies. It can also introduce different risks. Equal-weight funds must periodically rebalance, which can lead them to sell companies that have risen sharply and add to companies whose prices have fallen.
The approach can therefore work well when market leadership broadens, but it can lag significantly when a small number of mega-cap companies dominate the market.
Investors are increasingly using the strategy in both ways, according to Murphy. Some are treating equal-weight funds as a tactical position to benefit from broader market participation, while others view them as a long-term diversification tool.
“If you’re equal weighted, you’re always broadly diversified. You’re not really picking a winning horse; you’re betting on all the horses,” Murphy said.
RSP’s growing assets remain small relative to the largest conventional S&P 500 ETFs. Vanguard S&P 500 ETF, iShares Core S&P 500 ETF and SPDR S&P 500 Trust together hold close to $3 trillion, with Vanguard’s fund accounting for roughly $1 trillion.
Still, the expansion of the equal-weight ETF universe gives investors considerably more choices than simply switching from a traditional S&P 500 fund to RSP.
The Invesco Russell 1000 Equal Weight ETF provides exposure to the Russell 1000 on an equal-weight basis, while the First Trust Nasdaq-100 Select Equal Weight ETF focuses on Nasdaq-100 companies based partly on quality and growth characteristics.
Other funds apply equal weighting to specific investment themes. The ProShares S&P 500 Dividend Aristocrats ETF targets companies that have increased dividends for at least 25 consecutive years. The iShares MSCI USA Equal Weighted ETF provides equal-weight exposure to large- and mid-cap U.S. stocks.
The ALPS Equal Sector Weight ETF takes a different approach by allocating equally across economic sectors while retaining float-adjusted market-cap weighting within each sector.
There are also sector-specific strategies. The Invesco S&P 500 Equal Weight Technology ETF equal-weights technology companies within the S&P 500, while the SPDR S&P Biotech ETF provides equal-weight exposure to U.S. biotechnology companies. The Invesco S&P 500 Equal Weight Materials ETF focuses on materials and natural-resource companies.
The range of products allows investors to decide whether they want to diversify across the entire market, reduce concentration within a particular sector, or target a specific investment factor.
The broader shift also highlights an important feature of market-cap-weighted indexes: their concentration rises automatically when a small number of companies outperform.
That mechanism helped investors enormously during the mega-cap technology rally. But it can become a source of risk when those same companies lose momentum.
The S&P 500’s market-cap weighting means investors who own the index are not simply making a broad bet on U.S. companies. They are also making a substantial bet on the largest companies and, increasingly, on the economic themes driving those companies.
Equal weighting changes that exposure by transferring more portfolio weight toward companies that have smaller market capitalizations.
Geraci noted that investors have another way to achieve a similar diversification objective: increasing exposure to mid-cap stocks directly.
Historically, the equal-weighted S&P 500 has behaved similarly to mid-cap equities, he said, suggesting that investors seeking to reduce mega-cap concentration could consider lower-cost mid-cap funds instead.