Are Equal-Weight S&P 500 ETFs Bubble-Proof?

During the summer, we discussed in our email newsletter, The Nerdy Investor, how a few stocks dominate the S&P 500, with NVIDIA being a significant player. (You can read that issue here.) Now, Reddit is starting to take notice…

To address plead_thy_fifth’s inquiry: there are indeed several exchange-traded funds of this nature. They are known as equal-weight S&P 500 ETFs, and we will be analyzing their advantages and disadvantages below.

On a side note, Plead_thy_fifth mentions a potential “massive bubble” in their post, a sentiment shared by others. Even OpenAI CEO Sam Altman has suggested the possibility of an AI bubble. I delved into this topic in a recent episode of BW’s Smart Money Podcast. The Nerdy Investor explored the AI bubble theory in more detail in our December issue (you can read that here).

Currently, there are two non-leveraged equal weight S&P 500 ETFs available. They are detailed below. The data is from VettaFi, Google Finance, and fund websites, accurate as of market close on December 2, 2025, and is provided for informational purposes only.

• The Invesco S&P 500 Equal Weight ETF (RSP) has an expense ratio of 0.20%, with a year-to-date return of 8.77%. It has an average dividend yield of 1.63% over the last 30 days.

• The Invesco S&P 500 Equal Weight Income Advantage ETF (RSPA) has an expense ratio of 0.29%, with a year-to-date return of 1.48%. It generates additional income by selling options on its holdings. It has an average dividend yield of 9.05% over the last 30 days.

• Con: Higher fees and lower returns. The Vanguard S&P 500 ETF (VOO), the largest S&P 500 ETF by assets under management, has an expense ratio of 0.03% and is up 16.58% year-to-date. These are significantly lower fees and higher returns compared to the equal-weight funds mentioned above.

• Pro: Potentially more protection against a tech bubble. The top 7 stocks in VOO, all of which are large-cap tech stocks, make up about one third of the ETF’s holdings, despite it being an S&P 500 ETF. In the equal-weight funds listed above, however, each stock accounts for roughly the same fraction of a percent of the ETF’s holdings. If something bad happens to Big Tech in the years ahead — say, if it turns out that the AI boom is overhyped — an equal-weight ETF may not fall as much as a market-cap-weight S&P 500 ETF like VOO.

• Pro: Higher dividend yields. VOO’s average yield over the last 30 days is 1.10%, which is lower than the equal-weight funds listed above. Many of the big tech stocks that dominate regular S&P 500 ETFs like VOO do not pay dividends, so equal-weight ETFs may be better for income investors.