This S&P 500 ETF Could Help Protect You Against One of the Stock Market's Biggest Risks Right Now
2026-09-27 11:19
•Stefon Walters •The Motley Fool
• •••••••••••••• Axe Cap view
Diversify Away from S&P 500 Tech Concentration
An equal weight S&P 500 ETF offers a way to reduce heavy tech dominance in your portfolio.
The S&P 500’s tech concentration — nearly 38% in the top 10 names — is a growing crack in an otherwise solid foundation. While giants like Apple, Microsoft, and Nvidia continue to dominate returns, their sheer weight also means a stumble sends the index tumbling hard. For South African investors, this concentration risk spills over into Rand exposure given how USD/ZAR reacts during tech sell-offs. The Invesco S&P 500 Equal Weight ETF (RSP) spreads your bets across all 500 companies evenly, cutting tech exposure to around 15%. That means less drama when one sector flounders and steadier returns over time. It’s a trade-off though — less upside potential if tech rallies explode higher. Given our local market’s FMCG and banking stocks remain steady but less volatile, balancing offshore equity risk is sensible. Watch the rand: a weaker USD/ZAR could offset foreign gains. This idea may falter if tech continues to outperform dramatically. this is just our opinion and not financial advice
We’d buy RSP over traditional tech-heavy S&P ETFs to protect against tech-driven shocks, while trimming concentrated USD/ZAR exposure. Still keep some exposure to tech through local proxies like Naspers or Prosus for growth upside.
- RSP
- USD/ZAR
- Naspers
- Tech sector rallies outperform equally weighted ETFs
- USD strength fades reducing Rand hedge benefits
6/10
The S&P 500 has become heavily concentrated in large-cap tech stocks, with the top 10 holdings accounting for nearly 38% of the index. This concentration poses downside risk if tech stocks decline. The Invesco S&P 500 Equal Weight ETF (RSP) offers an alternative by weighting all S&P 500 companies equally, reducing tech sector exposure from 37.9% to 14.7% and providing better downside protection, though with lower upside potential.
Our take is based on reporting first published by The Motley Fool.