Meet the ETF That Beat the S&P 500 for Over 20 Years -- and History Suggests It's Ready to Pop Again

The S&P 500 (SNPINDEX: ^GSPC) is simply a powerhouse index, with decades of past surviving adjacent the worst carnivore markets, crashes, and recessions.

It's besides a market-cap-weighted index, meaning larger stocks are weighted much heavy wrong the portfolio. That isn't needfully a atrocious thing, arsenic ample companies often adhd much stableness to the index.

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But for astir of the past 25 years, the S&P 500 has been outperformed by its equal-weighted counterpart: the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP). Here's wherefore past says this ETF could beryllium poised for much maturation successful the years ahead.

Why put successful an equal-weight S&P 500 ETF?

The Invesco S&P 500 Equal Weight ETF includes each of the stocks from the S&P 500. However, alternatively than ranking them by marketplace cap, each holdings marque up astir the aforesaid percent of the portfolio.

For example, Nvidia is the largest institution successful the S&P 500, accounting for astir 8% of the scale by marketplace cap. But that banal accounts for lone astir 0.2% of the Equal Weight ETF's portfolio, akin to each different institution successful the fund.

Historically, the Equal Weight ETF has proved to beryllium much lucrative, outperforming the S&P 500 by a reasonably wide borderline for astir of the past 2 decades.

The scale lone began closing the spread implicit the past mates of years, arsenic mega-cap tech companies person skyrocketed successful value. When supercharged stocks similar Nvidia marque up a larger stock of the S&P 500, they assistance the full scale with their explosive growth.

Why this ETF is positioned for maturation

The different broadside of that coin, though, is that a comparatively tiny fig of companies tin besides resistance the full scale down.

The "Magnificent Seven" -- comprising Apple, Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla -- unneurotic relationship for astir one-third of the S&P 500's full value. These stocks person been deed hard successful caller weeks, arsenic investors turn cautious astir AI spending.

The Roundhill Magnificent Seven ETF, which holds lone these 7 stocks, has plunged by much than 13% successful the past month. Excluding those 7 stocks, though, the remainder of the S&P 500 has surged by much than 2.5% implicit that period. But due to the fact that the S&P 500 is truthful heavy weighted toward megacap tech, the wide scale has inactive dipped.