Are Equal-Weight S&P 500 ETFs Bubble-Proof?

Again in the summertime, we wrote in our electronic mail publication, The Nerdy Investor, about how a handful of shares dominate the S&P 500 — and the way NVIDIA specifically dominates the index. (You’ll be able to learn that challenge right here.) Now, Reddit appears to be taking notice…

To reply plead_thy_fifth’s query: there are certainly various exchange-traded funds like this. They’re referred to as equal-weight S&P 500 ETFs, and we’re taking a look at their execs and cons under.

Facet notice: Plead_thy_fifth refers to a “huge bubble” of their publish, they usually’re not alone in that concept. Even OpenAI CEO Sam Altman has speculated that we could also be in an AI bubble. I mentioned this in a latest episode of NerdWallet’s Good Cash Podcast. The Nerdy Investor took a extra in-depth take a look at the AI bubble concept in our December challenge (you’ll be able to learn that right here).

On the time of writing, there are two non-leveraged equal weight S&P 500 ETFs in the marketplace. They’re listed under. Knowledge is sourced from VettaFi, Google Finance and fund web sites, is present as of market shut Dec. 2, 2025, and is meant for informational functions solely.

• The Invesco S&P 500 Equal Weight ETF (RSP) has an expense ratio of 0.20%, and is up 8.77% year-to-date. Its common dividend yield during the last 30 days is 1.63%.

• The Invesco S&P 500 Equal Weight Revenue Benefit ETF (RSPA) has an expense ratio of 0.29%, and is up 1.48% year-to-date. It sells choices on its holdings to generate further earnings. Its common dividend yield during the last 30 days is 9.05%.

• Con: Larger charges and decrease returns. The Vanguard S&P 500 ETF (VOO), the most important S&P 500 ETF by belongings beneath administration, has an expense ratio of 0.03% and is up 16.58% year-to-date. These are significantly decrease charges and better returns than both of the equal-weighted funds listed above.

• Professional: Probably extra safety towards a tech bubble. The highest 7 shares in VOO, all of that are large-cap tech shares, make up about one third of the ETF’s holdings, regardless of it being an S&P 500 ETF. Within the equal-weight funds listed above, nonetheless, every inventory accounts for roughly the identical fraction of a % of the ETF’s holdings. If one thing dangerous occurs to Large Tech within the years forward — say, if it seems that the AI increase is overhyped — an equal-weight ETF might not fall as a lot as a market-cap-weight S&P 500 ETF like VOO.

• Professional: Larger dividend yields. VOO’s common yield during the last 30 days is 1.10%, which is decrease than the equal-weight funds listed above. Lots of the massive tech shares that dominate common S&P 500 ETFs like VOO don’t pay dividends, so equal-weight ETFs could also be higher for earnings buyers.

There are additionally equal-weight ETFs on different indexes apart from the S&P 500.

• The biggest equal-weight Dow Jones Industrial Common ETF by belongings beneath administration is the First Belief Dow 30 Equal Weight ETF (EDOW). It has an expense ratio of 0.50%, a year-to-date return of 13.62%, and a median dividend yield during the last 30 days of 1.41%.

• The biggest equal-weight Nasdaq 100 ETF by belongings is the First Belief Nasdaq 100 Equal Weighted Index Fund (QQEW). It has an expense ratio of 0.55%, a year-to-date return of 14.24%, and a median 30-day yield of 0.44%.

For those who’re involved that your index funds are too concentrated in Large Tech, equal-weight S&P 500 ETFs are a possible resolution that might see much less volatility within the occasion that the largest tech shares begin to underperform. In addition they usually pay greater dividends than typical S&P 500 ETFs.

But when Large Tech does not take a tumble, equal-weight S&P 500 ETFs might proceed to lag behind their market cap-weight counterparts when it comes to returns — particularly after their charges, which are usually greater than typical index funds.

The creator owned shares of the Vanguard S&P 500 ETF on the time of publication.