Prediction: This ETF Will Be the Best Way to Invest in the S&P 500 to Finish 2026

The S&P 500 (SNPINDEX: ^GSPC) is one of my favorite and most effective ways to invest because it checks off three key boxes: instant diversification, exposure to U.S. blue chip stocks, and it's cheap. History has shown that you can't go wrong with it over the long run.

However, the standard S&P 500 isn't the only way to invest in the index. You can also go the equal-weight route with the Invesco S&P 500 Equal Weight ETF (NYSEMKT: RSP). So far, through market close on July 10, RSP is slightly outperforming the S&P 500, 11.1% to 10.5% this year, but I expect this trend to continue through the year.

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Same companies, but a different approach

The standard S&P 500 is weighted by market cap, so larger companies account for more of the index than smaller ones. As a result, the world's largest tech stocks account for a large portion of the index and make it as top-heavy as it has ever been.

RSP, on the other hand, contains the same S&P 500 companies, but it weights each company virtually equally. Here are the S&P 500's top 10 holdings and how much their weights compare in the index versus in RSP:

Data sources: Vanguard and Invesco. VOO percentages as of May 31; RSP percentages as of July 10.

There's a huge difference between 10 companies accounting for more than 39% of a fund's performance and just below 2%. In the S&P 500's case, its performance is heavily influenced by its top holdings. As they go, so do the index and the ETFs that mirror it.

Why the equal-weight S&P 500 is built to outperform this year

There have been plenty of concerns this year about the valuations of megacap tech stocks and whether an AI bubble is inflating them. This situation has led many investors to rotate out of growth stocks and into value stocks. A good example is that Apple is the best-performing "Magnificent Seven" stock, up 16.4%, yet still underperforms Coca-Cola -- a poster child for modest stock price appreciation and dividend focus -- which is up 20.8%.

The tech sector isn't struggling by most standards, but it's not the high-flying force that we've grown accustomed to seeing over the past few years. I still expect it to perform well this year, but I believe other sectors, such as industrials and energy, will continue to outperform. And with the standard S&P 500 so heavily weighted toward tech stocks (38.6% of it), I think it will underperform compared to RSP.

I still believe investing in tech stocks will be one of the best ways to grow your money over time, but investors are beginning to worry about the overconcentration in the standard S&P 500. The index is meant to be diversified and to cover a lot of ground, and although it still contains companies from every major sector, a handful of companies ultimately control much of its destiny.

RSP shouldn't be your S&P 500 replacement

I think the standard S&P 500's market cap weighting is generally a good thing because it allows heavyweights to drive growth. If you had to choose between it and RSP as the core staple of your portfolio, I'd say go with an S&P 500 ETF.

However, if you're looking to invest in the S&P 500 and want a complementary way to do it, RSP is a good choice to finish out the year and hedge against the index's concentration.

We can't say for certain how either will perform, but historically, going with RSP hasn't meant sacrificing gains. The S&P 500 has noticeably outperformed it over the past decade, 255% to 162%, but RSP has produced better gains since it first hit the market in April 2003. Past performance doesn't guarantee future results, but I expect RSP to continue producing respectable long-term gains.

Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.