3 ETFs Outperforming S&P 500 in 2026 as Mega-Caps Wane

Understanding Equal-Weight ETFs and Their Role in Diversification

Equal-weight ETFs are gaining attention as investors seek to mitigate the risks associated with traditional cap-weighted indexes. These funds distribute investments evenly across their holdings, reducing the concentration risk that comes with allowing a few large companies to dominate returns. This approach can lead to more balanced exposure and potentially better long-term performance.

RSP: The Equal-Weight Benchmark

The Invesco S&P 500 Equal Weight ETF (RSP) is a leading example of this strategy. With $90.7 billion in assets under management, it has been around since April 24, 2003, making it one of the most established equal-weight funds. RSP holds all 500 S&P 500 constituents at roughly equal weight, around 0.2% each, and rebalances quarterly. This structure ensures that no single company, even a major tech giant like NVIDIA or Apple, can significantly influence the fund’s performance.

Key features of RSP include:
* A 0.2% expense ratio
* A 1.57% dividend yield
* A year-to-date return of about 1%
* An annual return of approximately 11%

While RSP outperforms SPY, the standard cap-weighted S&P 500 ETF, which is down about 4% year-to-date, it may lag when mega-cap growth is driving the market.

EQL: Equal Weight at the Sector Level

Alps Equal Sector Weight ETF (EQL) takes a different approach by equalizing at the sector level. Instead of distributing weights equally across individual stocks, EQL allocates equal portions to each of the 11 GICS sectors. This results in a more balanced representation of different economic sectors, offering potential inflation protection and income.

EQL holds the eleven Select Sector SPDR ETFs as its underlying positions, with Energy, Utilities, and Materials receiving significant allocations. While within each sector, the largest companies still dominate, none can overwhelm the portfolio due to the sector-level equalization.

Key features of EQL include:
* A 0.27% expense ratio
* A 1.58% dividend yield
* A year-to-date return of about 3%
* An annual return of approximately 14%

However, EQL is smaller and less liquid than RSP, which can result in wider bid-ask spreads on active trading days.

EQWL: Equal Weight Among the Mega-Caps

Invesco S&P 100 Equal Weight ETF (EQWL) focuses on the S&P 100, applying equal-weight logic to the 100 largest companies in the index. This fund maintains the quality filter of the S&P 100 while reducing concentration risk among mega-caps.

EQWL’s top holdings cluster around 1.1% each, with companies like Boeing, GE Aerospace, Eli Lilly, and Merck among the highest-weighted positions. While it is down about 2% year-to-date, EQWL has returned 265% over ten years, reflecting the compounding power of holding quality large-cap businesses at equal weight through full market cycles.

Key features of EQWL include:
* A 0.25% expense ratio
* A 1.82% dividend yield
* A year-to-date return of about -2%
* An annual return of approximately 265% over ten years

However, EQWL is more sensitive to what happens in the mega-cap tier, as there is no mid-cap cushion like in RSP.

Choosing the Right Equal-Weight Structure

Each of these funds addresses a different aspect of diversification:
* RSP is ideal for investors seeking broad diversification across the entire S&P 500.
* EQL suits those who think in terms of sector exposure and want every corner of the economy represented equally.
* EQWL fits investors who want to stay in mega-cap territory but remove the winner-take-all weighting that makes the standard large-cap index so top-heavy.

The starting point is deciding whether you want to diversify across stocks, across sectors, or simply within the largest names — each fund is built for a different answer.

The Importance of Retirement Income Planning

While many investors focus on picking the right stocks and ETFs, they often overlook the bigger picture: retirement income. The Definitive Guide to Retirement Income was created to address this gap, offering strategies to convert investments into a reliable retirement paycheck. This free guide outlines the straightforward math and approaches needed for a smooth transition from building wealth to living on wealth. Learn more here.