The S&P 500's Biggest Stocks Keep Getting Bigger. Here's the ETF I'd Buy to Diversify
2026-08-25 08:15
•David Dierking •The Motley Fool
•••• ••••••••• Axe Cap view
Too Much Tech: Why Equal Weight ETFs Matter Now
The dominance of a handful of US tech giants risks masking broader market opportunities—here’s what South African investors should consider.
The S&P 500's concentration in tech giants like Apple, Nvidia, Microsoft, and Google has reached extremes, with just a few companies making up over a quarter of the index. This concentration can distort performance and increase risk if these few stocks stumble. South African investors should watch this carefully, as the rand often moves with risk appetite tied to US markets. A weaker USD/ZAR can pressure rand-earnings companies like Naspers and Prosus, which depend on global tech exposure. The Invesco S&P 500 Equal Weight ETF (RSP) spreads risk more evenly, avoiding overexposure to mega-cap tech. Given the current rotation away from the “Magnificent Seven,” RSP’s 4% outperformance through 2026 signals a smarter diversification play. However, if US tech rallies again, equal-weight ETFs might lag. For now, cautious diversification is prudent, especially as a rand-based investor facing FX risk and sector concentration. this is just our opinion and not financial advice
Trim exposure to mega-cap tech-heavy US ETFs like VOO. Instead, consider adding allocations to equal-weight products such as RSP to buffer against single-stock shocks. Maintain rand-hedged stocks for direct local growth but watch your USD/ZAR exposure carefully.
- RSP
- USD/ZAR
- Naspers
- Prosus
- Renewed strength and momentum in US technology mega caps
- Unexpected rand depreciation increasing FX volatility
7/10
The S&P 500 has become increasingly concentrated in megacap tech stocks, with Nvidia and Apple alone accounting for ~14% of the index and the top four tech companies representing over 25%. The article recommends the Invesco S&P 500 Equal Weight ETF (RSP) as an alternative that equally weights all 500 companies, reducing concentration risk. RSP has outperformed traditional cap-weighted S&P 500 ETFs by nearly 4% year-to-date in 2026 as investors rotate away from the Magnificent Seven stocks.
Our take is based on reporting first published by The Motley Fool.