Overview
- A concentrated group of mega-cap tech names—Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla—has weakened recently, and a Roundhill ETF that holds only those seven plunged more than 13% while the rest of the S&P 500 rose.
- The Invesco S&P 500 Equal Weight ETF (RSP) gives each S&P 500 company roughly the same weight, so losses in a few giant stocks have far smaller effects on its returns than on the market-cap-weighted S&P 500.
- Over the past roughly 25 years RSP has generally outperformed the market-cap S&P 500, though the gap narrowed recently as mega-cap gains lifted the cap-weighted index.
- Product design and investor flows are reinforcing concentration: massive inflows into cheap, market-cap ETFs and issuer moves that increase retail access have boosted the largest stocks’ share of core indexes.
- For investors the trade-off is clear: equal-weight funds lower single-stock concentration but can differ in cost and turnover, so the choice affects portfolio risk, potential returns, and how much rebalancing is required.