You might own more Microsoft, Apple, Google and Exxon than you think

Many investors are looking for well diversified investment portfolios and most own the S&P 500 index in their retirement accounts. Investors should however beware that standard S&P funds or ETF’s like SPY are market cap weighted, meaning that the bigger a company is (its market cap) the more of its shares are in the index. For example, recently Apple was 4+% of the SPY, however Apple is only 1 of 500 companies in the index. Today the top 10 (of 500) companies in the SPY account for over 18% of the index. This may not be the diversification you are looking for.

Here is a great tool from that displays the cap weighting of the S&P Index.

SP Map

There are other choices for the S&P 500 that are market weighted, like the Guggenheim S&P 500 Equal Weight ETF (RSP). This ETF has been around for over 10 years and is a very safe investment. Whereas half of SPY’s total capitalization is made up of mega-cap stocks (companies with market values in excess of $200 billion), these giants only make up 11 percent of RSP’s line-up.

Here is a comparison of the holdings between the two ETF’s.


Also the RSP has consistently outperformed the SPY (S&P 500 index), see below.

SP chart-1

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