I'm Not Buying the Vanguard S&P 500 ETF -- But I'd Buy This Alternative Right Now

1 hour ago 4

Matt Frankel, CFP, The Motley Fool

Wed, May 27, 2026 astatine 6:42 AM CDT 4 min read

The Vanguard S&P 500 ETF (NYSEMKT: VOO) is 1 of the astir fashionable concern vehicles successful the world. Including the communal money mentation of the ETF, determination is $1.6 trillion successful full assets invested successful the low-cost Vanguard product.

To beryllium clear, determination are bully reasons wherefore truthful galore investors usage the Vanguard S&P 500 ETF arsenic the backbone of their portfolios. The S&P 500 is considered the champion indicator of however U.S. large-cap companies are doing, and Vanguard's mentation has a rock-bottom 0.03% disbursal ratio, making it an highly cost-effective mode to get exposure.

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1 large occupation with the S&P 500

The S&P 500 has produced bonzer returns implicit the past decennary oregon so, and the biggest crushed wherefore is the stellar show of the mega-cap tech stocks. But this has besides produced what I see to beryllium the biggest drawback of investing successful the S&P 500 -- it has go highly top-heavy.

Man looking astatine fiscal charts connected monitors.

Nvidia (NASDAQ: NVDA) unsocial makes up astir 8% of the benchmark index, and Apple (NASDAQ: AAPL) present accounts for astir 6.5%. The 10 largest companies successful the S&P 500 present marque up 40% of the index. And the 22 largest S&P companies relationship for arsenic overmuch of the index's value arsenic the 478 smallest names successful the index.

In a nutshell, by investing successful the S&P 500, you're betting heavy connected the largest companies successful the market. If 1 of the apical stocks performs poorly, it tin resistance the scale little each by itself.

I'd bargain this alternate alternatively

One mode to put successful the S&P 500 without the attraction hazard is with the Invesco Equal Weight S&P 500 ETF (NYSEMKT: RSP). Just arsenic with the Vanguard S&P 500 ETF, you'll put successful the 500 large-cap companies that marque up the index, with the large quality that an adjacent magnitude of wealth volition beryllium invested successful each azygous company.

In different words, each of the 500 companies accounts for astir 0.2% of the ETF's assets. This means that a comparatively tiny S&P 500 constituent similar First Solar (NASDAQ: FSLR), oregon eBay (NASDAQ: EBAY), carries the nonstop aforesaid value successful the scale arsenic Apple oregon Nvidia.

Here's what this means to you. The Invesco Equal Weight ETF inactive gives you broad-based vulnerability to American concern -- conscionable without the attraction risk. For example, if Nvidia were to autumn by 20% owed to a atrocious net report, you'd hardly announcement it successful the show of this ETF.

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