Core Insights - The S&P 500 has experienced a significant recovery, rising over 78% since the beginning of 2023 after a decline of more than 19% in 2022 [1][2] - The current Shiller price-to-earnings (P/E) ratio is above 40, a level reached only three times in over 150 years, indicating that the index is trading at historically high levels [3][4] - The S&P 500 is heavily weighted towards a few large companies, with the "Magnificent Seven" (Nvidia, Microsoft, Apple, Amazon, Alphabet, Meta, and Tesla) accounting for approximately 34% of the index [6][7] Investment Strategies - To mitigate the risks associated with overconcentration in the S&P 500, investors can consider an equal-weight S&P 500 ETF, such as the Invesco Equal Weight S&P 500 ETF (RSP), which distributes investments more evenly across all companies [9][10] - The equal-weight approach reduces reliance on a handful of stocks, with top holdings in RSP significantly lower than in the standard S&P 500, providing a more balanced risk profile [11][12] - Despite the standard S&P 500 outperforming RSP over the past decade (225% vs. 134%), RSP has shown comparable performance since its inception in April 2003, indicating that it can still yield substantial long-term returns [12][14]
With the S&P 500 at Historically High Levels, Consider This Alternate Way to Invest in the Index
The Motley Fool·2025-11-08 11:45