The S&P 500 remains the world’s most tracked index, with the three largest ETFs—Vanguard S&P 500 ETF (VOO), SPDR S&P 500 ETF Trust (SPY), and iShares Core S&P 500 ETF (IVV)—all replicating its performance.
However, the increasing dominance of megacap stocks has raised concerns among some investors. As of July 9, the top three S&P 500 companies—Nvidia, Microsoft, and Apple—make up over 20% of the index, and the top 10 account for 38%.
In response, BlackRock (NYSE: BLK) has launched new ETF options to help investors diversify away from megacap overconcentration:
- iShares S&P 500 3% Capped ETF (TOPC): Caps each stock at a maximum of 3% weighting, redistributing excess to smaller constituents. Currently, only the top five holdings approach the 3% cap.
- iShares S&P 500 ex Top 100 ETF (XOEF): Excludes the top 100 S&P 500 companies altogether, focusing on the smaller 400 members of the index.
BlackRock suggests that investors can pair XOEF with the iShares S&P 100 ETF (OEF) to customize their megacap exposure based on their risk appetite.
These ETFs provide more balanced alternatives for those seeking S&P 500 exposure without the heavy concentration risk of tech megacaps.