Better Buy: The Vanguard S&P 500 ETF or This Magnificent Alternative?

• The Vanguard S&P 500 ETF is simply a almighty semipermanent investment.

• However, arsenic it becomes much heavy weighted successful tech stocks, it's besides much volatile.

• There's an alternate concern that tin inactive supply entree to the S&P 500 with little risk.

• 10 stocks we similar amended than Invesco S&P 500 Equal Weight ETF ›

The Vanguard S&P 500 ETF (NYSEMKT: VOO) is simply a staple successful galore investors' portfolios, and for bully reason. The S&P 500 Index (SNPINDEX: ^GSPC) is simply a powerhouse wealthiness generator, earning full returns of astir 695% implicit the past 20 years, arsenic of this writing.

But arsenic the scale becomes progressively tech-heavy, immoderate investors whitethorn privation an alternate that is little weighted toward megacap tech giants portion inactive providing vulnerability to the S&P 500. In that case, the Invesco Equal Weight S&P 500 ETF (NYSEMKT: RSP) could beryllium a astute choice. Here's however to determine which is the amended prime for you.

Most S&P 500 ETFs -- including the Vanguard S&P 500 ETF -- are market-cap-weighted, meaning the largest companies marque up the largest proportionality of the portfolio. With the largest companies successful the U.S. present worthy trillions of dollars, a tiny fig of stocks power the full S&P 500.

Nvidia, Apple, and Microsoft unsocial person a combined marketplace headdress of much than $11 trillion, and together, these 3 stocks marque up implicit 20% of the Vanguard S&P 500 ETF's portfolio.

That dense tilt toward tech giants tin beryllium some an vantage and a risk. Tech stocks are famously lucrative (Nvidia has surged by astir 1,000% successful the past 3 years alone), but they tin besides beryllium notoriously volatile.

Many radical put successful S&P 500 ETFs due to the fact that they privation a comparatively harmless and unchangeable investment. And portion it remains a coagulated semipermanent choice, this benignant of concern does person a higher hazard of volatility arsenic it leans progressively toward the tech sector.

The Invesco Equal Weight S&P 500 ETF besides tracks the S&P 500, but alternatively than being market-cap-weighted, each banal makes up astir the aforesaid percent of the portfolio.

This means that each banal makes up a precise tiny fraction of the fund, which tin bounds risk. When tech behemoths are weighted the aforesaid arsenic the much stable, established companies wrong the S&P 500, nary azygous banal oregon manufacture tin importantly sway the fund's performance.

Again, this tin beryllium a double-edged sword. While this fund's equal-weight quality helps bounds risk, it tin besides bounds its earnings. When overperformers are weighted the aforesaid arsenic slower-growing companies, the superstar stocks can't assistance the ETF's wide net similar with a market-cap-weighted S&P 500 ETF.