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This S&P 500 ETF Is Weighted Based on Revenue and Isn’t Tech Heavy at the Top
Many exchange-traded funds (ETFs) which mirror the S&P 500 are tilted heavily towards big tech stocks, and that’s because those stocks have the highest market capitalizations. The risk for investors, however, is that by investing in those types of ETFs, they can be vulnerable if there’s a market sell-off in tech in the near future.
One way to get around that and to minimize that risk is by focusing on ETFs which use different weightings. The Invesco S&P 500 Revenue ETF (NYSE Arca:RWL) invests in the S&P 500 but its weightings are based on revenue. The top three stocks in the fund right now are Walmart (NYSE:WMT), Amazon (NASDAQ:AMZN), and CVS Health (NYSE:CVS). And the top stock accounts for just under 4% of the overall weight, which means investors aren’t taking on too much exposure to just a single stock.
If you want to invest in the S&P 500 but want a little bit less risk, this fund can be a more ideal option to consider right now, especially given the high valuations in tech. This revenue-weighted fund has risen by 168% in value over the past 10 years, which is less than the S&P 500’s overall gains of 211%. But that’s because of how well tech stocks have done in the past. In the next 10 years, it could be a far different story, which is why for forward-looking investors, this revenue-weighted fund may be a more attractive option to consider today as other stocks in the S&P 500 could outperform tech in the future.
