Concentration risk has been persistent in the U.S. market in recent years. Narrow leadership in the hands of a few megacap, AI-linked stocks has pushed the S&P 500 into levels of concentration not seen in many years.
Today, the top 10 holdings in the S&P 500 snag more than 35% of the benchmark. That top heaviness exceeds even the concentration we saw during the height of the dot-com bubble.
It’s no surprise that diversification has been a popular theme with advisors and investors this year. This year, anytime we’ve asked in our surveys what’s top of mind, concentration risk is among the biggest concerns.
The good news is that ETF asset flows suggest those with concerns are doing something about it.
Among the most popular equity ETFs in 2026 is a classic smart beta fund that simply rearranges the stocks in the S&P 500 index by equally weighting them. The simple but effective approach, aimed at tackling concentration risk, is not only delivering diversification but also delivering strong results relative to the broad market this year.
See more: ETF of the Week: Invescco S&P 500 Equal Weight ETF (RSP)
The Invesco S&P 500 Equal Weight ETF (RSP) has raked in nearly $10 billion in fresh net assets year-to-date, landing it among the top 10 asset gathering leaders. As of early April, the S&P 500 index is tallying about 1% in losses so far in 2026. Meanwhile, RSP is up about 3%.
That four-point performance gap is the result of the diversification RSP provides by giving each component in the S&P 500 equal representation in driving performance. The weighting scheme also significantly alters the fund’s sector allocation.
Source: Invesco (as of 3/31/06), SSIM (as of 4/8/06), VettaFi
One of the defining characteristics of the 2026 equity market has been volatility and a change in leadership as mega-cap tech takes a backseat to sectors like energy and materials. Macro conditions and geopolitical tensions have shaken up market opportunity, and RSP has benefited.
S&P 500 Sector Performance YTD as Measured by Sector SPDRs
Source: SSIM
RSP has $87 billion in assets under management, and is considered one of the original smart beta ETFs. In the 23 years since it first launched, however, other funds have come to rely on equal weighting as a diversifying scheme.
Equal Weighting Growth Companies
One example of a strategy that turns to equal weighting is the index-tracking Barron’s 400 ETF (BFOR).
The fund selects “high performing” stocks across market capitalization with a “GARP + Quality” framework that uses 24 fundamental factors in the analysis of each name. These factors include sales growth, profitability, cash flows, and valuations, among others.
Once each name is scored and the best are selected, the portfolio equal-weights them. The growth-at-a reasonable price approach is performing well in 2026, delivering both diversification in the segment but also strong performance relative to the S&P 500 and the Russell 3000. Both indexes are flat to negative year-to-date. BFOR is up more than 4% in 2026.
Here’s a look at the BFOR’s sector breakdown, currently led by financials and industrials — one of the sectors seen as a winner in the AI infrastructure buildout theme. Notable here, too, is the fact the allocation to technology is about 25 percentage points lower than in the S&P 500.
Source: SS&C ALPS Advisors
There are many other equal weighted approaches, rearranging popular indexes like the Nasdaq 100, S&P 100 and the Russell 1000 in equal weighted baskets from various providers. Invesco also has an entire lineup of equal weighted sector ETFs. Goldman Sachs has a fund, the Goldman Sachs Equal Weight U.S. Large Cap (GSEW). The iShares MSCI USA Equal Weighted ETF (EUSA) swims in the MSCI index pond. Investors have many choices.
Managing Concentration Risk Within Equities
Equal weighting as a smart beta approach can lag markets when leadership is narrow and concentrated. That’s something we’ve seen happen in recent years. When that leadership is challenged and there’s a broadening in the market that reaches deeper into the pool of U.S. equities, many of these strategies turn to performance leaders.
Either way, we know that diversification and risk management are imperative to any sound long-term investment plan. Equal weighting is one of the effective ways to achieve that.
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