As of October 8, the top five holdings in basic cap-weighted S&P 500 ETFs combined for 29% of those funds’ rosters. Not surprisingly, that’s stirred talk about concentration risk. It’s also raised questions regarding how diversified those supposedly broad-based funds really are. That’s a rub with cap-weighted index funds. But that doesn’t mean investors need to rush out of those funds. They can augment/complement those exposures with equal-weight ETFs such as the ALPS Equal Sector Weight ETF (EQL).
Home to nearly $526 million in assets under management, EQL turned 16 years old in July. That confirms it is battle-tested across a variety of market settings. That’s compelling history to be sure. But investors are right to inquire about EQL’s here-and-now relevance. The ETF answers that bell with aplomb due to a unique equal-weight strategy. Rather than emphasizing equally weighting individual holdings, EQL applies that methodology to sectors. Translation: EQL has a 9.41% weight to tech stocks versus 35.29% in cap-weighted S&P 500 funds.
EQL Right for the Times
EQL isn’t about forcing end-users to make a decision between equal-weight and weighting by market capitalization. Rather, the ALPS ETF can be paired with a traditional broad market fund to offset some of the concentration risk currently found in those products. That is to say EQL’s proposition is highly relevant in the current environment.
“Recently, some investors have raised concerns about the increased concentration of market indexes like the S&P 500. The S&P 500 is a market-cap weighted [index. That] means the highest-valued companies make up the largest weights in the index. Due to the strong performance of a handful of large tech companies such as Nvidia and Microsoft (MSFT), just seven companies account for more than 30 percent of the S&P 500, as of August 2025,” noted Bankrate.
EQL tracks the NYSE Equal Sector Weight Index. It has accomplished its objective by equally weighting the 11 relevant sector SPDR ETFs. That means the ETF doesn’t directly hold individual stocks, so turnover is kept to a minimum. The result is an expense ratio of 0.27% a year, or $27 on a $10,000 stake, which is decent in this ETF category. Bottom line: Investors have good reasons to examine equal-weight ETFs today, including EQL.
“Investors may choose to buy an equal-weight fund as a way to reduce their exposure to the largest companies or boost their positions in smaller stocks in the index. If you’re concerned about the level of concentration in the S&P 500, equal-weight funds are a way to manage that risk,” concluded Bankrate.
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